RTRS:INSTANT VIEW - March industrial output up 7.3 pct y/y
(Reuters) - India's industrial output in March rose a faster-than-expected 7.3 percent from a year earlier, sharply higher than the median forecast for a 3.8 percent annual rise in a Reuters poll, government data showed on Thursday.
KEY POINTS:
- Manufacturing production rose 7.9 percent in March from a year earlier.
- February's industrial output annual growth rate was marginally revised up to 3.65 percent from 3.6 percent.
- Industrial output rose 7.8 percent in the 2010/11 fiscal year that ended in March, slower than 10.5 percent in the previous fiscal year.
"We were significantly above consensus at 4.4 percent, but the numbers have beat that also. The point is that major part of the industrial slowdown that we are seeing from November onwards is induced by the base effect.
"The underlying growth in the industries has improved significantly in the second half of FY11, a trend which we expect would continue in FY12. We expect low double-digit number IIP growth in FY12 as against 7.5 percent kind of levels in FY11."
RADHIKA RAO, ECONOMIST, FORECAST PTE, SINGAPORE:
"The sharp rebound in factory output witnessed in March is above our and market expectations. Recovery has stemmed from pick-up in capital goods production, even as consumer goods moderates on rising borrowing costs and higher input prices.
"Strong headline IIP number should allay some concerns on growth given the RBI's aggressive anti-inflationary stance, though this data print alone is unlikely to dissuade policymakers to let their guard down. Another 25 bps hike in June is still on the cards, everyone is eyeing Monday's WPI numbers."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"IIP numbers are very healthy and encouraging and prove the underlying strength of the growth momentum. This will improve the RBI's (Reserve Bank of India's) focus on inflation control...."
MARKET REACTION:
* The most-traded 7.80 percent 2021 bond yield rose 2 basis points to 8.27 percent after the sharply stronger-than-expected industrial output data.
* The BSE Sensex turned briefly positive to 0.1 percent from negative 0.4 percent before the data.
* The partially convertible rupee was little changed at 44.76/77 per dollar.
* The 5-year and 1-year overnight indexed swap rates rose 2 basis points each to 8.33 percent and 8.11 percent respectively after the data.
BACKGROUND:
- India's domestically-driven economy is expected to have expanded 8.6 percent in the last fiscal year and the central bank has forecast growth to moderate to about 8 percent in the current fiscal year.
- The Reserve Bank of India (RBI) raised interest rates by a sharper-than-expected 50 basis points on May 3 and said fighting inflation was its priority, even at the expense of short-term growth.
- The HSBC Markit Purchasing Managers' Index, an indicator of manufacturing expansion, edged up to 58.0 in April from 57.9 in March.
- While both input and output price indexes fell from the highs seen in March, they remained way above the 50-mark as soaring fuel and raw material prices drove up costs and fed into output prices, a clear indication that high inflation was here to stay.
- India's headline inflation rose faster than expected in March to nearly 9 percent on higher fuel and manufacturing prices, while the manufacturing inflation quickened to 6.21 percent compared with 4.94 percent recorded in the prior month.
- The RBI has raised rates nine times since mid-March 2010 and economists expect it to raise rates by 25 basis points each at its policy reviews in June and July.
- India's exports, which in March rose 43.9 percent to $29.1 billion, surged to a record high of $245.9 billion in the 2010/11 fiscal year.
(Reporting by India Treasury Team; editing by Malini Menon, Aradhana Aravindan)
