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India’s factory output climbs
March 12, 2013 , 8 : 29 pm
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Indian Finance Minister, Chidambaram
India's industrial output rose more than economists estimated in January following policy changes by the government to bolster an economy expanding at the weakest pace in a decade. Production at factories, utilities and mines climbed 2.4 per cent from a year earlier after a revised 0.5 percent drop in December, the Central Statistical Office said in New Delhi yesterday. The median of 28 estimates in a survey was for a gain of 1.3 per cent.
The government in last month's budget said it will trim the fiscal deficit to a six-year low, seeking to reduce inflation risks and boost the central bank's scope to cut interest rates. Wholesale prices probably increased at the slowest pace in more than three years in February, the median estimate in a Bloomberg survey shows before a report due tomorrow.
"Amidst expectations of a stretched and gradual demand revival, a sharp upswing in output is unlikely," Tirthankar Patnaik, a Mumbai-based strategist at Religare Capital Markets, said before the release. The central bank will probably lower borrowing costs at next week's policy meeting, he said.
Federal finance minister P. Chidambaram targets a budget gap of 4.8 per cent of gross domestic product in the year through March 2014, from 5.2 per cent, in a bid to avert a credit-rating downgrade. The administration has taken steps in recent months to open the economy to more foreign investment, spur exports and speed up stalled road and rail projects to revive growth.
Rupee and bonds
The rupee has appreciated about 2 per cent against the dollar since the policy changes began in mid-September, paring its loss in the past year to 7.9 per cent. The currency rose 0.2 per cent to 54.285 per dollar in Mumbai. The yield on the benchmark 8.15 per cent bond due June 2022 advanced to 7.87 per cent from 7.84 per cent on Monday.
The BSE India Sensitive Index was little changed. Reserve Bank of India (India's central bank) governor Duvvuri Subbarao has signaled inflation risks and a record current-account shortfall may limit the extent he can reduce borrowing costs.
Wholesale inflation probably eased to 6.6 per cent in February, according to the survey. Consumer prices rose 10.91 per cent last month from a year earlier, one of the highest rates in the world, another report showed yesterday.
The central bank lowered its benchmark repurchase rate to 7.75 per cent in January from 8 per cent, the first reduction since April 2012. A report on Monday showed exports climbed 4.2 per cent in February from a year earlier. The trade gap was $14.9 billion.
Car makers such as Maruti Suzuki India are bracing for the first annual sales decline. Local deliveries fell 4.6 per cent.
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