By Rajesh Kumar Singh and Manoj Kumar
NEW DELHI (Reuters) - India's industrial output grew lower than expected in March, weighed down by a partial withdrawal of stimulus measures and a rate hike, data showed on Wednesday.
The 13.5 percent growth was the sixth straight double-digit monthly expansion, driven largely by robust manufacturing output. Analysts do not expect the central bank to tighten policy based on these numbers.
They say the Reserve Bank of India (RBI) will wait for cues on inflationary pressures and demand in the economy and the overall global economic situation before tightening policy further.
The yield on India's 10-year bond yield eased two basis points after the data release.
The latest data in Asia's third-largest economy compares with the median forecast in a Reuters poll for a rise of 15 percent and February's figure of 15.1 percent.
Economists see the pace of growth tapering off as the low-base effect wears off and the impact of rate hikes and a partial withdrawal of stimulus kicks in.
Data on Wednesday showed manufacturing production climbed an annual 14.3 percent in March. The 2008/09 output was upwardly revised to 2.8 percent from the earlier estimate of 2.6 percent.
COST PRESSURES
Rising cost pressures are dragging down the pace of manufacturing growth, as evidenced by a second-straight monthly decline in the HSBC Markit Purchasing Managers' Index in April.
The rapid acceleration in the world's second-fastest growing major economy after China is boosting consumer demand far ahead of what can be met by existing supply capacity, stoking inflationary pressures to levels the RBI sees as "worrisome."
Manufacturing inflation has topped 7 percent in February and March, suggesting inflation is fast becoming a demand-side problem. A central bank deputy governor has said its levels would be key in deciding future policy moves.
Analysts expect monetary policy tightening along the year, as the RBI moves to cool demand through rate hikes until firms crank up their potential output. The bank has already lifted rates twice by a total of 50 basis points since March, the month headline inflation hit a 17-month high of 9.9 percent.
But tightening runs the risk of quelling the recovery in the economy, which is seen notching 8.5 percent in 2010/11 after probably growing 7.2 percent in the year before, as private demand has not yet returned to pre-financial crisis levels.
Editing by Malini Menon
Reuters India
