NEW DELHI: India’s industrial production grew by five percent in February 2015, its highest rate in nine months, indicating a boost in Asia’s third-largest economy.
The year-on-year jump in production by Indian factories, mines and utilities was higher than the revised 2.8-per cent growth recorded in January and beat economists’ expectations of 2.5-3 per cent. Analysts welcomed the fastest pace of growth since November last year, but warned the recovery remained fragile.
“The fact is the economy is still performing below potential and all indicators are suggesting that we are just at the beginning of a gradual recovery,” Dharmakirti Joshi, chief economist at Indian credit rating agency Crisil.
“Some more hand-holding from the RBI (Reserve Bank of India) in form of rate cuts will be needed but that depends on how inflation pans out,” Joshi added.
Consumer inflation edged up for the third straight month to 5.37 per cent in February and is expected to spike further after unseasonal rains pushed up food prices. The factory data comes three days after the RBI decided to keep rates unchanged at 7.50 per cent, resisting calls from the government and markets to reduce the cost of borrowing to bolster the economy.
The RBI has already cut rates twice this year, but Governor Raghuram Rajan has made clear he will not rush into further cuts until inflation is tamed. The RBI has a target of bringing inflation consistently below six per cent by January 2016, and to four percent for the 2016/17 financial year.
The government of Prime Minister Narendra Modi, who stormed to power last May on pledges of economic reform, foresees India growing up to 8.5 per cent in 2015/16, making it the fastest-growing major economy.
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