India industrial output jumps 2.5%, inflation eases

[NEW DELHI] India's industrial production grew by a stronger-than-expected 2.5 per cent in September, according to government data released Wednesday, boosted by consumer demand during the main religious festival season, while retail price inflation fell to a record low.

The 2.5 per cent output expansion by factories, mines and utilities in September from the same month a year ago was far higher than the 0.6 per cent forecast by financial markets.

The production figures were good news for the right-wing government of Prime Minister Narendra Modi who took office in May following a landslide election win on pledges of reviving growth in Asia's third-largest economy.

Manufacturing production, which represents three-quarters of the Index of Industrial Production, climbed by 2.5 per cent in September from the same month a year earlier.

India's economy has posted two years of sub-five-per cent growth, marking the longest slowdown in a quarter-century, as the central bank has kept interest rates elevated to combat stubborn inflation.

But separate data showed India's inflation had slowed to a record-low in October of 5.52 per cent, pushed down by big falls in food and oil costs.

The figures fanned hopes that India's hawkish central bank could respond positively to business demands for interest rate cuts to spur growth-boosting investment.

The inflation data was broadly in line with market expectations and marked the lowest figure since India started calculating retail inflation numbers in January 2012.

Foreign investors have poured money into Indian stocks in hopes the new government's moves to clear infrastructure projects and create a more favourable business climate will lift growth and help India emulate China's economic ascent.

Mr Modi has been seeking to slash red tape, attract global firms to "make in India" and stimulate the manufacturing sector to create jobs for the army of young people who enter the workforce each year.

AFP