By Unni Krishnan April 12 (Bloomberg) -- India’s industrial production growth exceeded 15 percent for a third month as demand for cars and televisions increased, adding to inflationary pressures that may prompt the central bank to raise interest rates this month. Output at factories, utilities and mines expanded 15.1 percent from a year earlier in February after growing 16.7 percent the previous month, the statistics department said in a statement in New Delhi today. That compares with the 16 percent median estimate in a Bloomberg News survey of 23 economists. Production rose 17.6 percent in December, the most since at least 1994, according to Bloomberg data. Factory output and consumer demand has recovered across Asia after governments boosted spending to stimulate their economies during last year’s global recession. That has prompted central banks from Australia to Malaysia to raise interest rates to fight inflation and avert asset bubbles, with the Reserve Bank of India raising borrowing costs on March 19. “Today’s growth rate is definitely much higher than what we had thought when we took all the accommodative measures,” Indranil Pan, chief economist at Mumbai-based Kotak Mahindra Bank Ltd., said before the report. He expects India to raise interest rates by 1 percentage point by the end of the financial year in March 2011, starting with the next monetary policy review on April 20. Stimulus Measures Interest-rate cuts, public spending and tax reductions worth a combined 12 percent of gross domestic product since September 2008 have helped India rebound from the global slump. The nation’s $1.2 trillion economy may grow 8.2 percent in the year ending March 2011 from 7.2 percent in the previous fiscal year, the government forecast in February. Growth in China, the world’s third-largest economy, quickened to 10.7 percent in the fourth quarter of 2009, the fastest pace since 2007. Inflation accelerated to a 16-month high of 2.7 percent in February and property prices rose the most in almost two years. Rising disposable incomes and low borrowing costs have led to higher consumer demand for items from soaps and shampoos to passenger cars in India. That will prompt the central bank to raise benchmark rates and return to a “normal monetary policy,” Saumitra Chaudhuri, an adviser to Prime Minister Manmohan Singh, said in an interview on April 8. Hard Landing Car sales by companies including Maruti Suzuki India Ltd. and Tata Motors Ltd. rose 25 percent in the year ended March 31, the fastest pace in six years, according to the Society of Indian Automobile Manufacturers. Maruti Suzuki, the country’s largest carmaker, is operating its factory at peak capacity and may find it difficult to meet rising demand, the Business Standard newspaper reported April 9. India risks a “hard landing” if inflation isn’t controlled, central bank Governor Duvvuri Subbarao has said. He raised interest rates last month for the first time since July 2008, increasing the reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent. The Reserve Bank cited “increasing capacity utilization” in factories as one of the main factors fanning price gains in the Indian economy. The country’s benchmark wholesale-price inflation accelerated to 9.89 percent in February, the fastest pace since October 2008. That exceeds the central bank’s forecast for inflation of 8.5 percent by the end of March. Manufacturing production gained 16 percent in February while mining increased 12.2 percent, today’s report showed. Electricity output rose 6.7 percent.

Source