New Delhi: India’s industrial production rose 9.8% in June from a year earlier, lower than downwardly revised annual growth of 10.9% in May, as tighter monetary policy trimmed demand, data showed on Friday. This growth rate was the slowest in eight months, below all estimates, as interest rates at a five-year high curbed consumer spending.
Manufacturing production rose 10.6% in June from a year earlier, compared with provisional annual growth of 11.9% in May.
India’s industrial production grew in June at the slowest pace in eight months, below all estimates, as interest rates at a five-year high curbed consumer spending.
Production at factories, utilities and mines rose 9.8% from a year earlier, following a revised 10.9% gain in May, the Central Statistical Organisation said in a statement in New Delhi. Analysts expected an 11 percent increase.
Companies including motorcycle maker Bajaj Auto Ltd. and Tata Motors Ltd., India’s biggest producer of trucks and buses, have cut output in the past two months as higher borrowing costs discourage buyers. The Reserve Bank of India may keep interest rates unchanged as inflation has also cooled.
The Reserve Bank of India has raised its policy rates by 2.25 percentage points since October 2004 to curb loan growth and contain inflation below a 5% target, a level achieved for the past eight weeks. Loans to consumers and companies rose 23.6% in the year to July 20, compared with a 31.7% gain in the same period last year.
“Higher interest rates will impact overall demand,” said Praveen Kadle, finance director at Tata Motors, whose sales fell for the third month in July.
Production of consumer goods in India rose 4.2% in June, according to Friday’s statement. Manufacturing output gained 10.6% and mining rose 3.6%.
Havell’s India Ltd., India’s biggest producer of switches for households, said it is trying to beat diminishing demand by selling more in smaller towns where it has never sold before.
Business confidence in India has fallen for two straight quarters due to higher interest rates and a rising currency, the National Council of Applied Economic Research said. The business confidence index, based on responses from 493 companies, declined to 137.9 in the current quarter ending Sept. 30 from 151.3 in the preceding quarter, according to the research group.
India’s manufacturing expanded at a slower pace in July, ABN Amro Bank NV said on Aug. 1 on the basis of its purchasing managers’ index, which declined to the lowest level in more than two years on account of increased borrowing costs and the gains in the rupee.
Merchandise exports, which account for two-fifths of India’s industrial output, grew 14% in June, the slowest pace in three months, as the rupee rose 9.1% this year, making it the best performer in Asia.