Tuesday, 11 March, 2008

India's Industrial Output Growth Probably Quickened in January

India's industrial production growth probably accelerated to a three-month high in January as companies such as Nokia Oyj and Honda Motor Co. expanded capacity to make more mobile phones and cars.

Production at factories, utilities and mines rose 8 percent from a year earlier after gaining 7.6 percent in December, according to the median forecast of 14 economists in a Bloomberg News survey. The statistics office will release the data at noon in New Delhi tomorrow.

Finance Minister Palaniappan Chidambaram said last week that his budget plan to cut duties and reduce the tax burden on individuals will spur demand and boost manufacturing output in Asia's third-largest economy. Growth is forecast by the government to weaken this year to the slowest pace since 2005.

Industrial production ``is rising on account of higher sales of consumer goods and stronger exports,'' said Sujan Hajra, chief economist at Anand Rathi Securities Pvt. Ltd. in Mumbai.

Honda Motor Co. last month doubled manufacturing capacity at a plant near the capital New Delhi to 100,000 cars annually. Honda plans to invest 20 billion rupees ($490 million) to set up a second factory in northern Rajasthan state.

Nokia, the world's biggest mobile phone maker, plans to invest $75 million in 2008 to make more cellular phones in a nation where about one in five people own such products.

``India is one of the fastest growing telecom markets in the world and proximity to the customer is a business imperative,'' said Sachin Saxena, director of operations at Nokia India. ``India is poised to become the telecoms manufacturing hub of the world.''

Rising Incomes

Companies are expanding capacity on optimism that rising incomes in the world's second-most populous nation will help boost sales. Vodafone plans to invest $2 billion in 2008 to win more customers. Richard Branson's Virgin Mobile wireless services entered the Indian market this month.

Per capita incomes have more than doubled since 1991 when India opened its industry to foreign participation and lifted state-imposed caps on capacity expansions. Per capita incomes are expected to rise to 24,256 rupees in the current fiscal year to March 2008, from 7,902 rupees in 1994.

``The budget aims at leaving more money in the pockets of people which will stimulate consumption and give a further rise to demand,'' Chidambaram said on March 6. ``I would want Indians to spend 50 percent and save the other 50 percent.''

Chidambaram in his Feb. 29 budget speech cut the excise tax on small cars, buses, motorcycles and scooters to 16 percent from 12 percent and increased the income tax exemption limit to 150,000 rupees from 110,000 rupees.

That may help Chidambaram lift growth in the $906 billion economy, which is expected to expand 8.7 percent in the year to March 31. Still, growth will average 9.2 percent since 2005, the quickest pace since India's independence in 1947 and behind only China among the world's major economies.

India's exports of gems, jewelry and other manufactured goods rose 20.5 percent in January from a year earlier to $13.14 billion, the government said March 3.

India's IIP YoY% Change Forecasts

Index of Industrial Production
Company YoY% Change
Median 8%
Average 8.1%
High 9.4%
Low 7.5%
Number of Estimates 14
For the Month Jan. 08

Anand Rathi Securities 9.4%
Capital Economics Ltd. 10.0%
Credit Analysis & Research Ltd. 8.6%
Forecast Singapore 8.2%
Dun & Bradstreet Info. 8.0%
HSBC 7.5%
ICICI Securities 8.9%
IDBI Gilts Ltd. 8.0%
JPMorgan Chase Bank 7.6%
Kotak Mahindra Bank 8.0%
Lehman Brothers 7.8%
Standard Chartered Bank 8.1%
Thomson IFR 8.0%
UBS 7.6%