Industrial growth seen falling sharply

Industrial growth seen falling sharply

India’s industrial output probably grew in July at the slowest pace in nine months, as interest rates at a five-year high forced consumers to trim spending.

Production at factories, utilities and mines rose 9.6% from a year earlier, weaker than June’s 9.8% gain, according to the median forecast of 17 economists in a Bloomberg survey. The Central Statistical Organization’s report is due on Wednesday.

Easing production growth would make less likely another increase in interest rates, a scenario still seen by analysts as a possibility last week after the release of data showing the economy unexpectedly accelerated in the three months to 30 June.

“The pressure on the central bank to raise borrowing costs is diminishing," said Shubhada M. Rao, chief economist at Yes Bank Ltd. “Inflation numbers look comfortable and we are seeing moderation in other indicators such as bank loans and vehicle sales."

Weaker industrial production, which makes up a quarter of the $854 billion (Rs34.5 trillion) economy, may slow growth.

The Reserve Bank last week reiterated its forecast of an 8.5% expansion in the fiscal year to 31 March from 9.4% in the previous year.

Gross domestic product increased 9.3% in the quarter ended 30 June from a year earlier.

Manish Modi and Subramaniam Sharma contributed to this story.