POLL - India's July industrial output seen up 6.5 pct yr/yr

NEW DELHI (Reuters) - India's industrial output in July probably rose 6.5 percent from a year earlier, more than in recent months but still consistent with a slowing economy as high inflation and interest rates bite, a Reuters poll showed.

The median forecast in a poll of 10 analysts exceeded the 5.4 percent annual growth in June and May's 4.1 percent, although the pace of industrial growth remains well below the double-digit rates of 2006 and early 2007.

"Industrial slowdown is here to stay and in our view it is yet to be bottomed out," said N.R. Bhanumurthy, economist at the New Delhi-based Institute of Economic Growth.

"We expect the present double-digit inflation rate and its associated high interest rates to continue at least until the end of this year. This would dampen investments."

Reflecting some moderation in manufacturing, the ABN AMRO Bank purchasing managers' index (PMI) eased to a seasonally adjusted 57.8 in July from a four-month peak of 58.6 in June.

Data on Wednesday showed the infrastructure sector, which accounts for 26.7 percent of industrial output, grew an annual 4.3 percent in July, up from 3.4 percent in June.

After growing at or above 9 percent for the past three fiscal years, India's economy is slowing. In the June quarter, Asia's third-largest economy grew 7.9 percent from a year earlier, its slowest rate in 3-½ years.

The Reserve Bank of India (RBI) raised its key lending rate, the repo rate, three times in June and July, taking it to a seven-year high of 9.0 percent. It has also raised banks' reserve requirements this year to drain cash from the banking system.

Industrial production, which accounts for about a fifth of gross domestic product and is mostly geared to meet domestic demand, rose 8.1 percent in 2007/08.