India’s industrial output grew 10.9% in January. Manufacturing growth in the 10-month period between April 2006 and January 2007 stood at 12%, indicating that the country could still meet the 9.2% growth in gross domestic product (GDP) target the Centre has set for it.
The growth surprised analysts such as Chetan Ahya, economist, Morgan Stanley. “It was above our expectations of 10-10.5%,” said Ahya.
The faster-than-expected growth could force the central bank’s hand. The Reserve Bank of India (RBI) has tightened the money supply in an effort to curb inflation, which was at 6.12% for the week ended 24 February. Despite the lag involved between any effort at tightening money supply and the consequent fall in demand, the growth figure may encourage RBI to increase lending rates once more.
For seven of the past 10 months now, India’s industrial output has grown in excess of 10%. The latest figure, for January, comes on the back of a 12.5% growth in December.
Analysts said the growth would continue, and it could spur inflation further.
Reacting to the 10.9% growth recorded, Robert Prior-Wandesforde, a member of HSBC’s Asian economics team, said in a note that despite the growth being lower than December’s, “any talk of a slowdown is looking premature, while anybody arguing that RBI has finished tightening policy is likely to be disappointed. We expect RBI to tighten policy again soon, despite the drop in wholesale prices.” RBI will meet for a review of its monetary policy on 24 April.