India's industrial output grew in April, defying forecasts for a contraction, as recent rounds of fiscal and monetary measures spurred local demand and helped blunt the impact of a slump in exports.
The index for industrial production in April rose 1.4% from a year earlier, after a 0.8% contraction in March, data from the Central Statistical Organisation showed Friday.
The government revised the March output from a provisional 2.3% decline reported earlier. It didn't give any reasons for revising the data.
The median forecast in a Dow Jones Newswires poll of 11 economists was for a 0.5% drop in April output.
Local stocks rose after the release of the data, but pared the gains later, while government bonds slipped following the numbers.
Analysts said the central bank's rate cutting cycle was nearing its end as the economy starts to recover.
The Reserve Bank of India has cut its key lending rate, or repurchase rate, six times since October by a total of 4.25 percentage points to 4.75%.
"While the data wasn't unexpected as core sector data had already pointed toward a positive number, the economy is showing signs of bottoming out as government stimulus measures lead to strong growth in cement and construction sectors," said D. K. Joshi, principal economist at credit rating agency Crisil.
"The figures don't reflect the full impact of Reserve Bank of India's monetary easing, which should push the current weak recovery into a decisive improvement by October," he said.
Growth during April was led by electricity generation, which climbed 7.1% from a year earlier. Manufacturing activity, which makes up for nearly 80% of the index for industrial output, also rose after two months of declines.
Manufacturing activity increased 0.7% from a year earlier as a reduction in factory levies and rate cuts helped boost domestic demand and offset a fall in exports.
India's exports, which have fallen for seven months through April, appear unlikely to pick up before September, trade ministry officials had said earlier.
Source : online.wsj.com