India posts sluggish industrial output

India's industrial production grew at a slower-than-expected pace in February, weighed down by a contraction in output of consumer durable goods, reinforcing expectations the central bank will cut interest rates next week to revive demand.
While the expansion in output at 4.1 percent was below the 6.6 percent estimated by analysts, the January output growth was sharply revised down to 1.14 percent from 6.8 percent on an error in sugar production data.
Though the data is notorious for its volatility, taken together with other indicators it suggests broader economic activity remains frail. Other recent data showed manufacturing growth slowed in March, while the services sector grew at its worst pace in five months. "The lower February IIP (index of industrial production) number as well as the huge revision to January data highlights the growth concerns, and cements view of a 25 basis points rate cut from the RBI (Reserve Bank of India) next week," said Vivek Rajpal, India rate strategist at Nomura in Mumbai.
India's economy probably grew 6.9 percent in the fiscal year that ended in March, its slowest in three years as global economic uncertainty combined with high interest rates and input costs at home crimped investment.
The RBI is expected to cut interest rates on Tuesday for the first time in three years, lowering the policy repo rate by 25 basis points to 8.25 percent.
Manufacturing output, which makes up about 76 percent of industrial output, grew 4.0 percent in February compared with an annual 1.4 percent growth in the previous month.
Production of consumer durable goods fell 6.7 percent in February from a year earlier, its second straight contraction, reflecting the lagged impact of the central bank's aggressive interest rate tightening in the past two years. Overall consumer goods output shrank 0.2 percent on year. Meanwhile, capital goods production, a proxy for investment, recorded its first annual growth in six months, expanding 10.6 percent from a year earlier.