New Delhi: India's industrial output grew at its fastest pace in two years in November, strengthening the case for the central bank to tighten policy later this month to temper inflation expectations.
India's industrial output grew faster-than-expected 11.7 per cent in November from a year earlier, data showed yesterday.
"This number combined with an expected 7.3 per cent WPI inflation for Dec-ember, would strengthen the case for monetary tightening by the RBI," said Gaurav Kapur, senior economist at ABN Amro Bank, referring to wholesale price data due tomorrow.
The Reserve Bank of India (RBI), which reviews its quarterly policy on January 29, is expected raise banks' cash reserve ratio, the level of deposits that banks must keep in cash. Analysts are divided over when the RBI will start raising policy rates.
Bond yields
The benchmark 10-year bond yield revisited a near 15-month high of 7.81 per cent hit last Friday, after the data. The one-year overnight indexed swaps rose to 4.93/95 per cent from 4.90/95 per cent.
The partially convertible rupee pared some of its loss to be at 45.38/39 per dollar from 45.41/42 before the data.
The December inflation data, due on tomorrow, will be the last important data for the RBI to gauge price pressures before its policy review on January 29. A Reuters poll of 22 economists showed annual inflation jumping to 7.31 per cent in December from 4.78 per cent last month.
India and South Korea are expected to be among the first Group of 20 nations to follow Australia and raise rates.
"The number is extremely strong. Now a 25 basis points rate hike [in policy rates] in January is all but certain." said Ramya Suryanarayanan, an economist at DBS, Singapore.
But other economists think the RBI will hold off from increasing rates, as the bank credit remains below the central bank's forecast.
