(Adds quotes, consumer inflation data)
By Rajesh Kumar Singh
NEW DELHI, Sept 12 India's industrial production
unexpectedly rebounded in July while consumer inflation cooled
last month, offering some relief for policymakers who have been
battling the country's worst economic crisis in more than 20
Industrial output rose 2.6 percent in July from a
year earlier, its first expansion in three months, lifted by a
robust rebound in capital goods production - often seen as a
barometer for investments in Asia's third-largest economy.
A Reuters poll had forecast output would shrink by 0.8
percent. India also revised industrial output in June to show a
smaller decline of 1.8 percent year-on-year, versus 2.2 percent
in the provisional data.
The pickup in output in July will make life slightly easier
for Raghuram Rajan, the new governor of the Reserve Bank of
India (RBI), whose capacity to shore up slowing economic growth
is being hindered by high inflation and a battered rupee, which
has fallen to record lows against the dollar.
Rajan is due to hold his first interest rate meeting on
Sept. 20, two days after the U.S. Federal Reserve concludes a
monetary policy meeting, which could affect the rupee.
Indian retail inflation slowed to 9.52 percent in August
from 9.64 in July, data showed on Thursday, although private
economists were skeptical that it pointed to a better overall
"Industrial production and consumer inflation are both
better than expected and provide comfort," said Anubhuti Sahay,
an economist at Standard Chartered Bank.
"However, the broad macroeconomic picture of weak growth and
high inflation still remains the theme," she said.
C. Rangarajan, the prime minister's chief economic adviser,
said Thursday's data was in line with the government's forecast
that the economy will pick up later in the 2013/14 fiscal year.
"The second half of the year must pick up ... I believe this
is the new trend as far as industrial growth," Rangarajan told
TV station CNBC-TV18.
The weak rupee, which has plunged 16 percent
against the dollar since June 1, has pushed up inflation and
strained the national budget as the costs of imported items like
oil, fertilizer and other important commodities have risen.
The currency has been hit by investor concerns about India's
record high current account deficit, which hit 4.8 percent of
GDP in the year ended March 31, and concerns that India, along
with other emerging markets, will see reduced capital inflows
once the U.S. Federal Reserve starts to trim its stimulus
programme. Markets expect the Fed could decide to start scaling
back stimulus as soon as at its meeting next week.
The RBI's defence of the rupee through a liquidity squeeze
has driven up borrowing costs for Indian companies and prompted
private economists to cut economic growth estimates for the
current fiscal year to as low as 3.7 percent. That would be the
lowest growth since 1991/92 and well below last year's 5 percent
Government economic adviser Rangarajan said he expected
further improvement in inflation thanks to good summer rains.
"I believe food inflation will trend downwards and that may
have an impact on the CPI in the coming months," he said.
Rangarajan is due to release a revised economic outlook for
2013/14 on Friday.
India's manufacturing sector, which constitutes
about 76 percent of industrial production, grew 3.0 percent in
July from a year earlier, its fastest growth since March, the
federal statistics office said.
Capital goods production rose for the first time in four
months in July, posting annual growth of 15.6 percent. The
rebound in the sector was mainly driven by a nearly 84 percent
jump in the production of electrical machinery and apparatus.
(Additional reporting by Swati Bhat; Editing by Frank Jack
Daniel and Susan Fenton)