India April industrial production surges 17.6 pct

By ERIKA KINETZ AP Business Writer

MUMBAI, India (AP) - India's industrial output surged a surprise 17.6 percent in April over last year, as strong investment activity returns Asia's third-largest economy to pre-crisis levels of growth.

The growth in industrial production announced Friday was much stronger than expected. A Thomson Reuters survey of analysts had forecast an annual rise of 13.5 percent.

Manufacturing output grew 19.4 percent in April, mining grew 11.4 percent and electricity 6.0 percent. Capital goods output surged 72.8 percent, while production of consumer durables grew 37.0 percent, the Ministry of Statistics said.

"Investment is on an upturn, very sharply," said D.K. Joshi, chief economist at Crisil, a research and ratings agency.

Machinery and equipment was the fastest growing industrial sector, clocking 55.6 percent growth off last year's low base, another sign of investment activity.

March industrial output was revised upward from 13.5 to 13.9 percent.

This is the seventh straight month of double-digit industrial growth, and one more sign that Asia's third largest economy has rebounded to pre-crisis levels of activity.

This time last year, industrial output grew a sluggish 1.1 percent.

India's overall economic growth hit 8.6 percent for the quarter ended March, its best in two years.

Such strong industrial performance is out of line with historical norms.

Joshi said India's long-term average growth in industrial output has been around 8 percent, rising to near 10 percent in the last few years.

"Nothing has changed fundamentally to push growth up much beyond that," he said. He expects output to moderate, with growth settling at around 10 percent for the year.

Inflation, especially of food items, has been a persistent problem, and the central bank has hiked key interest rates twice since March. Many expect it to do so again when it meets again in July, if not before.

"If you keep getting surprises on the positive side in growth from industrial production, it will have implications for core inflation in the economy and you will see monetary tightening a little bit faster," Joshi said.