India's industrial output growth slowed to its weakest in six years in March, and analysts said that would limit measures the Reserve Bank could take to rein in inflation from 3-year highs.
Industrial production grew 3.0 per cent in March from a year earlier, official data showed on Monday, well below February's 8.6 per cent rise and a market forecast of 6.2 per cent.
It was the slowest annual growth since a 2.4 per cent rise in Feb 2002. Output growth has fallen from double-digit levels seen last year as tighter monetary policy and a strong rupee clipped demand.
'The government is very clear that they are prepared to sacrifice growth to contain inflation,' Axis Bank economist Saugata Bhattacharya said.
'You may not see particular easing of monetary policy, but RBI and other policy makers will be wary of tightening.'
Wholesale price inflation spiked to 7.6 per cent in late April, driven mainly by high prices of commodities and food, and analysts say the actual number could be much higher given deficiencies in data collection.
'The bad news is the industrial output data and the good news is that this will make the government refrain from taking any more aggressive steps to curtail inflation,' said Sujan Hajra, chief economist at Anand Rathi Securities.
'Clearly they have both inflation and growth to worry on their hands, and the government can do little about (inflation) as it is a supply-side problem.'
Industrial output rose 8.1 per cent in the 2007/08 fiscal year (April-March), slowing from 11.6 per cent in 2006/07, the data showed.
Manufacturing production rose 2.9 per cent in March from a year earlier, compared with 8.6 per cent in February.
Last month, the Reserve Bank of India (RBI) announced a total increase of 75 basis points in the cash reserve requirement (CRR) for banks to absorb cash that could otherwise add to inflation pressures.
But the RBI has kept the repo rate unchanged at 7.75 per cent for more than a year, after raising it five times between mid-2006 and March 2007. This is the rate at which the central bank lends short-term cash to banks.
C. Rangarajan, chairman of Prime Minister's Economic Advisory Council, said on Monday that inflation was expected to moderate to 6.0 per cent in the next three to four months.
Industrial production grew 3.0 per cent in March from a year earlier, official data showed on Monday, well below February's 8.6 per cent rise and a market forecast of 6.2 per cent.
It was the slowest annual growth since a 2.4 per cent rise in Feb 2002. Output growth has fallen from double-digit levels seen last year as tighter monetary policy and a strong rupee clipped demand.
'The government is very clear that they are prepared to sacrifice growth to contain inflation,' Axis Bank economist Saugata Bhattacharya said.
'You may not see particular easing of monetary policy, but RBI and other policy makers will be wary of tightening.'
Wholesale price inflation spiked to 7.6 per cent in late April, driven mainly by high prices of commodities and food, and analysts say the actual number could be much higher given deficiencies in data collection.
'The bad news is the industrial output data and the good news is that this will make the government refrain from taking any more aggressive steps to curtail inflation,' said Sujan Hajra, chief economist at Anand Rathi Securities.
'Clearly they have both inflation and growth to worry on their hands, and the government can do little about (inflation) as it is a supply-side problem.'
Industrial output rose 8.1 per cent in the 2007/08 fiscal year (April-March), slowing from 11.6 per cent in 2006/07, the data showed.
Manufacturing production rose 2.9 per cent in March from a year earlier, compared with 8.6 per cent in February.
Last month, the Reserve Bank of India (RBI) announced a total increase of 75 basis points in the cash reserve requirement (CRR) for banks to absorb cash that could otherwise add to inflation pressures.
But the RBI has kept the repo rate unchanged at 7.75 per cent for more than a year, after raising it five times between mid-2006 and March 2007. This is the rate at which the central bank lends short-term cash to banks.
C. Rangarajan, chairman of Prime Minister's Economic Advisory Council, said on Monday that inflation was expected to moderate to 6.0 per cent in the next three to four months.
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