India's industrial production grew in November at the slowest pace in 13 months, making it more likely the central bank may soon end more than three years of interest rate increases.
Production at factories, utilities and mines rose 5.3 percent from a year earlier after gaining a revised 12 percent in October, the statistics office said today in a statement in New Delhi. Analysts expected a 7.3 percent gain.
Though the increase is more than twice the pace of manufacturing growth in the U.S., the world's largest economy, it's less than half what India has averaged in the past year. Prime Minister Manmohan Singh this week formed a panel to suggest measures to boost the nation's industrial output.
``The central bank may not tighten monetary policy further,'' said Prasanna Ananthasubramaniam, a fixed-income analyst at ICICI Securities Ltd. ``The bank should be ready to ease rates though the time is not ripe to do it now, as there is the issue of oil prices that haven't been passed through.''
Manufacturing output rose 5.4 percent in November from a year earlier, the weakest pace since October 2006, according to today's statement. Production of consumer goods such as cars and refrigerators fell 2.6 percent, while mining output gained 3.5 percent and electricity production rose 5.8 percent.
Bonds Gain
The yield on the benchmark 10-year government securities fell 4 basis points to 7.53 percent at 12:15 p.m. in Mumbai as the bonds headed for the biggest weekly advance in almost a year. The benchmark stock index pared gains from the day's high, rising 0.8 percent to 20751.22 on the Bombay Stock Exchange.
The Reserve Bank of India has raised interest rates nine times since 2004 and ordered commercial lenders to set aside more funds as reserves five times in the past year to contain inflation below its target of 5 percent.
Inflation was unchanged at about 3.5 percent in the week ended Dec. 29, down from 6.7 percent at the start of 2007, as India refrained from raising fuel costs even as crude oil prices rose to a record over $100 a barrel.
Oil Minister Murli Deora said Jan. 3 India may decide to raise prices of auto fuels by the end of January, the first increase in 18 months, to lower the burden of record crude costs on state-run refiners.
India's central bank is next scheduled to set interest rates at a meeting on Jan. 29.
Profits Hurt
``The increase in interest rates is deterring first-time purchasers of automobiles,'' said Ravi Kant, managing director at Tata Motors Ltd., India's biggest maker of trucks and buses, on Jan. 8. He said discounts to boost sales are hurting profit.
Growth in passenger car sales halved to 8.8 percent in December. Cement production in November rose 4.5 percent from a year earlier after growth of 7 percent in October. ACC Ltd., India's biggest cement maker by capacity, said sales declined 6 percent last month.
India's $906 billion economy expanded 8.9 percent in the three months to Sept. 30 from a year earlier, the slowest pace in three quarters. Manufacturing increased the least in almost two years.
Growth in Asia's third-largest economy is expected to ease to 8.4 percent in 2008 from 9 percent last year and 9.4 percent in 2006, the World Bank said in a report this week.
China's industrial production in November rose 17.3 percent, in line with the average 17 percent growth in the past year.
Economists also said weaker Indian industrial production growth in November was partly due to a statistical effect. The Hindu festival of Diwali, which results in holidays in factories, fell in November in 2007 and in October in 2006.
``The industrial production numbers were influenced by Diwali holidays,'' said Rajeev Malik, a senior economist at JPMorgan Chase & Co. in Singapore. ``The December data will show recovery though the overall trend will be toward moderation.''
India's industrial production rose 9.2 percent in the eight months to November, slower than the 10.9 percent gain in the same period in the previous year.
Production at factories, utilities and mines rose 5.3 percent from a year earlier after gaining a revised 12 percent in October, the statistics office said today in a statement in New Delhi. Analysts expected a 7.3 percent gain.
Though the increase is more than twice the pace of manufacturing growth in the U.S., the world's largest economy, it's less than half what India has averaged in the past year. Prime Minister Manmohan Singh this week formed a panel to suggest measures to boost the nation's industrial output.
``The central bank may not tighten monetary policy further,'' said Prasanna Ananthasubramaniam, a fixed-income analyst at ICICI Securities Ltd. ``The bank should be ready to ease rates though the time is not ripe to do it now, as there is the issue of oil prices that haven't been passed through.''
Manufacturing output rose 5.4 percent in November from a year earlier, the weakest pace since October 2006, according to today's statement. Production of consumer goods such as cars and refrigerators fell 2.6 percent, while mining output gained 3.5 percent and electricity production rose 5.8 percent.
Bonds Gain
The yield on the benchmark 10-year government securities fell 4 basis points to 7.53 percent at 12:15 p.m. in Mumbai as the bonds headed for the biggest weekly advance in almost a year. The benchmark stock index pared gains from the day's high, rising 0.8 percent to 20751.22 on the Bombay Stock Exchange.
The Reserve Bank of India has raised interest rates nine times since 2004 and ordered commercial lenders to set aside more funds as reserves five times in the past year to contain inflation below its target of 5 percent.
Inflation was unchanged at about 3.5 percent in the week ended Dec. 29, down from 6.7 percent at the start of 2007, as India refrained from raising fuel costs even as crude oil prices rose to a record over $100 a barrel.
Oil Minister Murli Deora said Jan. 3 India may decide to raise prices of auto fuels by the end of January, the first increase in 18 months, to lower the burden of record crude costs on state-run refiners.
India's central bank is next scheduled to set interest rates at a meeting on Jan. 29.
Profits Hurt
``The increase in interest rates is deterring first-time purchasers of automobiles,'' said Ravi Kant, managing director at Tata Motors Ltd., India's biggest maker of trucks and buses, on Jan. 8. He said discounts to boost sales are hurting profit.
Growth in passenger car sales halved to 8.8 percent in December. Cement production in November rose 4.5 percent from a year earlier after growth of 7 percent in October. ACC Ltd., India's biggest cement maker by capacity, said sales declined 6 percent last month.
India's $906 billion economy expanded 8.9 percent in the three months to Sept. 30 from a year earlier, the slowest pace in three quarters. Manufacturing increased the least in almost two years.
Growth in Asia's third-largest economy is expected to ease to 8.4 percent in 2008 from 9 percent last year and 9.4 percent in 2006, the World Bank said in a report this week.
China's industrial production in November rose 17.3 percent, in line with the average 17 percent growth in the past year.
Economists also said weaker Indian industrial production growth in November was partly due to a statistical effect. The Hindu festival of Diwali, which results in holidays in factories, fell in November in 2007 and in October in 2006.
``The industrial production numbers were influenced by Diwali holidays,'' said Rajeev Malik, a senior economist at JPMorgan Chase & Co. in Singapore. ``The December data will show recovery though the overall trend will be toward moderation.''
India's industrial production rose 9.2 percent in the eight months to November, slower than the 10.9 percent gain in the same period in the previous year.
