India's industrial production accelerated in December as record investment in factories, roads and power plants boosted demand for cement and steel.
Production at factories, utilities and mines rose 7.6 percent from a year earlier, after gaining a revised 5.1 percent in November, the statistics office said in a statement in New Delhi. Analysts had forecast a 6.9 percent gain.
The pace of increases may not last, with the government citing moderating output as a reason growth will slow this year. Signs of a cooling expansion may prompt Reserve Bank of India Governor Yaga Venugopal Reddy to consider cutting interest rates.
"Capital spending is shoring up industrial output," said D.H. Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi. "The central bank will be under increasing pressure to reduce rates as the economy slows."
Reddy refrained from lowering rates at the Reserve Bank's last monetary policy announcement on Jan. 29 on concern rising oil and food prices would stoke inflation. Wholesale prices, which rose 4.1 percent in the last week of last month, don't reflect last year's 57 percent increase in crude oil costs.
The government on Thursday said India's economy may expand 8.7 percent in the 12 months to March 31, the weakest pace in three years, because of slowing manufacturing. Growth was 9.6 percent in the last financial year.
Higher borrowing costs are prompting consumers to postpone purchases. Bajaj Auto Ltd, India's second-largest motorcycle maker, posted a 16 percent drop in sales last month, its 12th straight month of declines.
ABN Amro Bank NV's purchasing managers' index indicated manufacturing growth recovered in December from the previous month and fell again last month to the lowest level since September.
Indian Finance Minister Palaniappan Chidambaram was to meet chairmen of state-run banks yesterday to find ways to reduce interest rates and boost consumer demand. Industrial production growth last year averaged 10.1 percent.
In response to the minister's call last month for lower rates, State Bank of India, the nation's biggest by assets, on Monday cut its benchmark prime lending rate by 25 basis points to 12.5 percent.
"The cumulative impact of monetary tightening will soften industrial activity in the coming months," said Rajeev Malik, senior economist at JPMorgan Chase & Co in Singapore. "Higher capital expenditure and infrastructure spending will likely be key offsetting factors."
Economists are split whether the central bank will immediately start cutting its benchmark rate because inflation stoked by higher oil and food costs presents a threat. Six of nine economists surveyed by Bloomberg News last month said Reddy would maintain the repurchase rate at 7.75 percent -- the highest in six years -- in the next monetary policy statement on April 29.
Indian Prime Minister Manmohan Singh's government is spending 1.34 trillion rupees (US$34 billion) in the year ending March 31, a 40 percent increase over the previous year, on roads, ports and power plants.
Companies are also expanding, encouraged by India's economic growth and on optimism rising incomes will stoke higher demand. Automakers, including General Motors Corp and Suzuki Motor Corp, are spending more than US$6.6 billion to build new factories in the South Asian nation.
Economic expansion in India is still the second-fastest after China of the world's biggest economies. The economy has grown an average 8.8 percent since 2003, the fastest expansion since the country's independence in 1947.
India's middle class, defined as those with annual disposable incomes between US$4,380 and US$21,890, has more than doubled to 50 million in the past decade, said McKinsey & Co.
TECH RACE: The Chinese firm showed off its new Mate XT hours after the latest iPhone launch, but its price tag and limited supply could be drawbacks China’s Huawei Technologies Co (華為) yesterday unveiled the world’s first tri-foldable phone, as it seeks to expand its lead in the world’s biggest smartphone market and steal the spotlight from Apple Inc hours after it debuted a new iPhone. The Chinese tech giant showed off its new Mate XT, which users can fold three ways like an accordion screen door, during a launch ceremony in Shenzhen. The Mate XT comes in red and black and has a 10.2-inch display screen. At 3.6mm thick, it is the world’s slimmest foldable smartphone, Huawei said. The company’s Web site showed that it has garnered more than
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
Vanguard International Semiconductor Corp (世界先進) and Episil Technologies Inc (漢磊) yesterday announced plans to jointly build an 8-inch fab to produce silicon carbide (SiC) chips through an equity acquisition deal. SiC chips offer higher efficiency and lower energy loss than pure silicon chips, and they are able to operate at higher temperatures. They have become crucial to the development of electric vehicles, artificial intelligence data centers, green energy storage and industrial devices. Vanguard, a contract chipmaker focused on making power management chips and driver ICs for displays, is to acquire a 13 percent stake in Episil for NT$2.48 billion (US$77.1 million).