NEW DELHI: India's industrial output accelerated by a surprise 2.5 percent in March, its fastest pace in five months, data showed Friday, fuelling hopes that a sharp economic slowdown could be bottoming out.
The March production growth from factories, mines and utilities beat financial market forecasts of a two percent rise and was up from a slim 0.5 percent increase in February.
While output expansion is still far below double-digit rates in previous years when Asia's third-largest economy was booming, "it's getting better slowly", said Credit Suisse economist Robert Prior-Wandesforde.
Three interest rate cuts since the start of 2013 should start feeding through to bolster consumer demand, analysts said, while export growth is improving with a sharply weaker rupee buttressing overseas sales.
The output figures are "generally in line with our view of a gradual uptick in activity", said Goldman Sachs economist Tushar Poddar.
The Congress-led government, buffeted by a string of corruption scandals, is desperate for signs of better growth before facing voters in general elections due in the first half of 2014.
The economy has been struggling under the weight of high interest rates in the face of uncomfortably strong inflation and sluggish investment amid fears about graft and disappointment with the slow pace of government economic reforms.
Manufacturing, which accounts for three-quarters of the Index of Industrial Production, grew by 3.2 percent in March.
Capital goods output of machinery and other products, seen as a key sign of investment intentions, grew by 6.9 percent and for the first time since mid-2011, posted back-to-back monthly rises.
"A recovery in capital spending is already under way and should slowly gather steam through the current fiscal year," said Prior-Wandesforde.
Output of so-called consumer non-durables like food grew by 6.5 percent in March, the second strongest number since January 2012.
But production of consumer durables, such as washing machines, fridges and furniture, stayed in the doldrums, falling by 4.5 percent, coinciding with the longest stretch of car sales weakness since records started being kept in 1997.
Car sales slid by 10.43 percent last month from a year ago, according to separate industry figures, as still high borrowing costs and consumer unease about the economy put the brakes on discretionary spending.
The government forecasts the economy will grow by at least six percent in this financial year, which began April 1, after estimated expansion of five percent last year its slowest rate in a decade.
Industrial output will remain reasonably tepid, experts say, partly due to bottlenecks caused by dilapidated highways, ports, power shortages and other infrastructure problems which dampen growth.
The government must make improving infrastructure, expanding fuel supplies and clearing long-delayed industrial projects a "priority", said Naina Lal Kidwai, head of the Federation of Indian Chambers of Commerce and Industry.
Business leaders were particularly alarmed by a grim energy situation.
Manufacturing output "is constrained by shortage of power. Electricity growth has decelerated to just half of what it was in 2011-12", Kidwai said.
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