India's industrial output in October rose a faster-than-expected 10.8 per cent from a year earlier, higher than the previous month's annual
growth of 4.4 per cent, government data showed on Friday.
The median forecast in a Reuters poll was for an annual rise of 8.5 per cent.
Manufacturing output rose an annual 11.3 per cent in October, the federal statistics office said in a statement.
COMMENTARY:
K K MITAL, HEAD OF PORTFOLIO MANAGEMENT SERVICES AT GLOBE CAPITAL, NEW DELHI:
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"The data shows that the fundamentals are still very strong and we are on track for a sharp pick up in economic growth. This has come as a confidence booster for the market and I would expect the markets to remain firm in the near term."
MARKET REACTION:
- The 30-share BSE index index extended gains to more than 1 per cent from 0.7 per cent beforehand.
- The most-traded 8.13 per cent 2022 bond rose 2 basis points to 8.17 per cent post the data.
- The benchmark five-year swap and the one-year swap rate were up two basis points each, at 6.95 per cent and 7.50 per cent respectively.
- The partially convertible rupee trimmed fall to be at 45.22 per dollar, from 45.27 before the data.
BACKGROUND:
- India's domestically driven economy grew 8.9 per cent for the second straight quarter in the three months to end-September on higher consumption, with the government forecasting higher growth in the next two quarters.
- The government has said annual economic growth in the current fiscal year to end-March 2011 could exceed 9 per cent.
- The HSBC Markit Purchasing Managers' Index, an indicator of manufacturing expansion, expanded at its fastest pace in six months in November to 58.4 from 57.2 a month ago. A level above 50 indicates growth.
- The HSBC Markit Business Activity Index, an indicator of expansion in the services sector, surged to a four-month high in November on strong growth in new orders.
- Annual car sales in India rose 20.8 per cent in November, reflecting a robust consumer demand in the economy.
- However, rising consumption and slowdown in investment point to potential inflationary risks.
- Annual investment growth slowed down to 11.1 per cent in the September quarter from 19 per cent in the previous quarter, while private consumption on an annualised basis accelerated to 9.3 per cent from 7.8 per cent in the previous quarter.
- Official data last month showed the wholesale price index rose an annual 8.58 per cent in October compared with an annual rise of 8.62 per cent a month ago.
- The government said on Tuesday overall inflation is now coming down, with a government adviser forecasting the November headline inflation to ease to 7.5 per cent.
- The Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on Wednesday overall inflation was still above the central bank's tolerance level.
- The RBI last month raised key lending and borrowing rates for the sixth time this year, by 25 basis points each to 6.25 per cent and 5.25 per cent respectively, and indicated the move was likely to be its last for at least around three months barring unforeseen circumstances.
- The central bank reviews monetary policy on December 16. Analysts polled by Reuters immediately post the November 2 policy expect the RBI to raise rates by a total of 25 basis points by the end of the fiscal year in March.