Factory Output Rise Adds To Revival Signs!!!! or just an effect of stimulus packages

India's industrial output rose in April, beating forecasts for a fall, driven by a pick-up in domestic demand that analysts said confirmed nascent signs of recovery and an end to the central bank's rate-cutting cycle. Factory output in April rose 1.4 per cent from a year earlier, recovering from a revised fall of 0.8 per cent in March and bettering forecasts for a decline of 0.2 per cent, adding to signs from China that activity in emerging economies was picking up.

Figures from China showed factory output growth rebounded in May alongside stronger expansion in credit and consumer spending, adding to hopes it can lead a global revival.

Manufacturing output, which accounts for 79 per cent of India's industrial production, rose an annual 0.7 per cent in the first month of the 2009/10 fiscal year.

The benchmark 10-year bond yield rose 6 basis points to a two-month high 6.94 per cent on the data, which was seen confirming an end to the central bank's aggressive rate cuts since last October.

Before the April rise, output had fallen in three of the previous four months. The data also reinforced other signs that domestic demand was picking up in India. Stronger-than-expected March quarter growth helped Asia's third-largest economy to expand by 6.7 per cent in 2008/09, although that was a six-year low and well below rates of 9 per cent or more for the previous three years.

The signs of a bottoming in growth and the re-election of the ruling coalition have seen economists revise up their forecasts for 2009-10, with the central bank's estimate of about 6 per cent now at the bottom of private sector economists' expectations.

Car sales rose an annual 2.5 per cent in May, climbing for the fourth month, and strong demand in rural and semi-urban areas pushed up motorcycle sales by 12.3 per cent from a year earlier.

Infrastructure output, accounting for a quarter of factory production, grew 4.3 per cent in April from a year earlier, data showed earlier this month.

A survey of purchasing managers last week showed manufacturing expanded for a second month in May to its highest in eight months.But exports remain in the doldrums, and the government expects their decline to continue until September. Exports fell 33.2 per cent in April from a year earlier to $10.74 billion.

Although India is less dependent on exports than China or other East Asian countries, with exports accounting for about 15 per cent of GDP, the sharp drop has offset some of the domestic gains.

Reuters