New Delhi: The country's industrial output grew for a second successive month in May as strong domestic demand offset faltering exports, which analysts said added weight to a view the central bank would not cut rates further.
Factory output in May rose 2.7 per cent from a year earlier, higher than a downwardly revised rise of 1.2 per cent in April and bettering forecasts for a 1.4 per cent rise, bolstering hopes activity in big emerging economies was picking up.
Output had fallen in December, February and March as Asia's third-largest economy was hit hard by a sudden liquidity crunch and the global downturn.
The global slump is still choking exports, which fell an annual 29 per cent in May, and hampering the broader recovery.
"The most significant feature is the positive manufacturing growth number despite a strong decline in India's exports," said chief economist at Anand Rathi Securities, Sujan Hajra.
"This just shows that the domestic demand situation is highly resilient," Harja added.
India is among a handful of Asian nations, along with China and South Korea, to see signs of recovery emerging following the worst global economic contraction since the Great Depression.
Manufacturing output, which accounts for about 80 per cent of India's industrial production, rose an annual 2.5 per cent in May compared with revised growth of 0.4 per cent in April.
And the Markit Purchasing Managers' Index (PMI) showed earlier this month that manufacturing activity expanded for a third straight month in June.
Car sales have risen in annual terms for the past five months. They rose 7.8 per cent in June, as buyers were attracted by a spate of new models and lower borrowing costs.
On Wednesday, the International Monetary Fund revised upwards India's growth forecast for 2009, even as world output is seen contracting more than earlier thought.
Lower factory and farm output dragged the country's overall economic growth to a six-year low of 6.7 per cent in 2008/09 (April/March) from 9 per cent the previous year.
Industrial output rose 2.6 percent in 2008/09, sharply lower than 8.5 per cent in 2007/08, as the global economic crisis and high interest rates hurt domestic demand and exports.
On Monday, the government projected budget spending to rise more than a third in 2009/10, and offered tax relief to individuals to lift demand.
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