New Delhi: India's industrial production grew more than 10 per cent for a sixth straight month, adding to inflation pressures even as Europe's debt crisis threatens to undermine the global economic recovery.
Output at factories, utilities and mines rose 13.5 per cent in March from a year earlier after gaining 15.1 per cent in February, the statistics department said in a statement in New Delhi yesterday.
India's figures come a day after China said its industrial output grew 17.8 per cent in April, highlighting the challenge the world's fastest-growing major economies face in containing inflation while keeping an eye on the dangers posed by Europe. Reserve Bank of India (RBI) Governor Duvvuri Subbarao has said he plans to raise interest rates in a "calibrated" way, given the risks to global growth.
"The developments in Europe have vindicated the RBI's approach of gradualism in monetary tightening, something which economists like us were worried about as growth had recovered very strongly in the Indian economy," said Mridul Saggar, a Mumbai-based economist at Kotak Securities. "We still expect a further rate hike of 25 basis points or more in July."
European policymakers on May 10 unveiled an unprecedented loan package worth almost $1 trillion and a programme of bond purchases to contain a sovereign-debt crisis emanating from Greece. The rescue programme comes after a 110-billion-euro aid package for Greece and would be used for countries like Portugal or Spain in case their finances buckle.
Vigil
While the developments in Europe may have limited impact on India, policy makers are carefully monitoring the situation, Commerce and Industry Minister Anand Sharma said May 10.
Subbarao on April 20 raised the central bank's benchmark interest rates by a quarter percentage point for the second time in a month, increasing the reverse repurchase rate to 3.75 per cent and the repurchase rate to 5.25 per cent. The next monetary policy statement is scheduled for release on July 27.
Inflation pressures are also building up in other parts of Asia as the region rebounds from the global recession.
In China, consumer prices climbed at the fastest pace in 18 months in April, adding pressure on policy makers to raise interest rates and allow yuan gains.
India's industrial output growth slowed in March as manufacturing expanded 14.3 per cent compared with a 16.1 per cent gain in the previous month.
Deficit: On track to meet target
India sees no difficulty with meeting the 5.5 per cent budget deficit target for the current financial year as revenue raised from the auction of airwaves helps ease pressure on its finances, a Finance Ministry official said yesterday.
India's food grain output may drop in the year ending next month after the weakest monsoon in more than three decades reduced rice yields. Food grain production may total 218.2 million metric tonnes, 7 per cent less than the 234.5 million tonnes a year earlier, the farm ministry said.
Prices may ease with a good monsoon this year, Finance Minister Pranab Mukherjee said yesterday. Rains this year may be 98 per cent of the 50-year average, the India Meteorological Department said on April 23. Farm output contributes about a fifth of the country's economic output.
