India's Industrial Output Growth Probably Accelerated in April
Bloomberg News, June 9, 2006

June 9 (Bloomberg) -- India's industrial production growth probably accelerated in April as exports rose and cement and steel companies increased output to meet demand at home.

Production at factories, utilities and mines rose 8.2 percent from a year earlier after expanding 7.7 percent in March, according to the median forecast of nine economists in a Bloomberg News survey. The government report is due June 12 at noon in New Delhi.

Rising demand for houses and state spending on roads, bridges and ports are driving construction and encouraging cement and steelmakers to expand. Prime Minister Manmohan Singh's government plans to spend 24 percent more on infrastructure in the year to March 31, targeting 10 percent growth during the next decade to end poverty in the world's second-most populous nation.

``Export-oriented industries and domestic demand are driving industrial growth,'' said Rajeev Malik, economist at JPMorgan Chase & Co. in Singapore. ``The momentum is likely to continue.''

Industrial production, which accounts for a quarter of the $775 billion economy, grew 8 percent in the year ended March 31 compared with 8.4 percent the previous year.

Overseas sales of gems, jewelry and other manufactured products expanded at the fastest pace in seven months in April. Exports, which accounts for two-fifths of production, rose 27 percent to $8.3 billion in April from a year earlier.

The government is easing trade rules and speeding up customs procedures as it aims to increase exports by 63 percent to $165 billion by 2010 and create jobs at home.

Cement, Steel

Cement companies produced 11.7 percent more cement in the April and steel production gained 8.6 percent from a year earlier, the government said May 30.

Tata Steel Ltd., the nation's second-biggest steelmaker, plans to put up new steel plants in the eastern states of Orissa, Jharkhand and Chhattisgarh costing a combined 670 billion ($14.55 billion) rupees. The company is also spending an additional 4.5 billion rupees to expand its steelmaking capacity in Jamshedpur by 1.8 million tons by mid 2008.

Associated Cement Companies Ltd., India's biggest cement maker by capacity, plans to spend 6.9 billion rupees to expand capacity by 1 million tons this year.

India's housing demand will probably expand fourfold to 80 million units by 2015, requiring an investment of $670 billion, according to the Associated Chambers of Commerce and Industry.

Demand for steel in India may more than quadruple in the next decade as the government increases investment in railways, ports and other infrastructure projects, the government estimates.

Government Spending

The government plans to spend 992 billion rupees on roads, ports and phone services in the fiscal year that started April 1 to improve infrastructure in the country to attract manufacturers and spur industrial production.

Industrial production also gained as Indian Oil Corp., the nation's largest refiner, and its state-run rivals produced 13.5 percent more fuel in April.

``I believe oil production will contribute significantly to April's growth,'' said Sujan Hajra, an economist with Mumbai- based Ananth Rathi Securities. ``I am quite bullish on the mining sector.''

Asia's fourth-biggest economy expanded 9.3 percent in the three months ended March 31, the second-fastest, after China, among the world's 20 biggest economies.

The fastest economic growth in more than two years was fueled by bumper harvests and as hiring at computer-related companies spurred spending on housing and mobile phones.

India's economic growth accelerated to 8.4 percent in the year ended March 31, from 7.5 percent in the previous year.

Manufacturing grew 9 percent in the year ended March 31 from 8.1 percent a year ago, the government said on May 31.

Farm output grew 3.9 percent, from 0.7 percent in the previous year, boosting rural incomes and demand for manufactured products. Agriculture accounts for 25 percent of the economy and provides livelihood to three-fifths of India's population.