Indian output growth slows
India's industrial production grew at the slowest pace in 11 months in September as decade-high interest rates crimped consumer demand and a stronger currency made exports less competitive.
Production at factories, utilities and mines rose 6.4 percent from a year earlier after gaining 10.7 percent in August, the statistics office said in New Delhi yesterday. That was below all 15 estimates in a Bloomberg News survey, where the median forecast was an increase of 9.2 percent.
Three years of rising borrowing costs in the world's second-fastest growing major economy have reduced demand for Tata Motors Ltd buses and Bajaj Auto Ltd motorcycles. The Reserve Bank of India is unwilling to cut rates as cash from record foreign investments, which caused the rupee to gain the most in at least 33 years, now threatens to fan inflation.
"The central bank can't start cutting rates anytime soon to support demand," said N.R. Bhanumurthy, an economist at the Institute of Economic Growth in New Delhi. "There is excess money with banks and that is potentially inflationary."
The Reserve Bank has raised its benchmark interest rate nine times since October 2004 to fight inflation, prompting commercial banks to increase their lending rates to the highest in almost a decade. State Bank of India, the country's biggest, charges 12.75 percent interest on loans to its best customers, the most since 1999.
Higher borrowing costs have slowed growth in bank loans to consumers and companies to 23 percent in the fortnight ended October 12 from 29 percent in the same period last year, according to the central bank. That's reducing demand for real estate, automobiles and other products.
Manufacturing production rose 6.6 percent, the weakest gain in almost a year, as output of consumer goods such as refrigerators and washing machines fell 0.6 percent in September, today's report said. Mining gained 6 percent while electricity output rose 4.5 percent.
Total automobile production, including buses, cars and motorcycles, fell 6.9 percent in September from a year earlier, according to the Society of Indian Automobile Manufacturers.
Bloomberg News
(China Daily 11/13/2007 page16)
