India's Industrial Growth Continues To Surge

Continued domestic demand, strong exports lead the way in April, but higher oil prices could curb growth in the near future.

NEW DELHI (AP) - India's industrial growth accelerated to 9.5 percent in April, suggesting the momentum seen in the past year was continuing, government data showed Monday. However, experts feared rising oil prices and interest rates could slow the expansion in coming months.

The impressive growth came on the back of sustained domestic demand and a surge in exports, which rose 27 percent in April from a year ago, according to data from the government's Central Statistical Organization.

Among industries, manufacturing output grew 10.4 percent in April compared with 8.5 percent in the same month a year ago. Mining production expanded 4.3 percent in April from last year, while electricity generation was up 5.6 percent.

Despite the acceleration seen in April, many experts said industrial expansion in the full fiscal year - which began April 1 - would be slower than last year's 8 percent growth.

The Center for Monitoring Indian Economy, an independent forecasting agency, on Monday projected industrial output to grow slower than last year and that the broader economy would likely expand to 7.9 percent this year compared with 8.4 percent in the fiscal year that ended in March.

''Rising interest rates and high crude oil prices will moderate growth after August,'' said Abheek Barua, an economist at ABN Amro Bank.

Last week, the Indian government increased domestic prices of gasoline and diesel fuel by 7 percent to 9 percent in the face of rising international crude prices.

Days later, the country's central bank announced a 25-basis-point hike in two key interest rates, prompting several commercial banks to review their lending rates. Analysts expect another rate hike by the central bank next month.

Monday's data from the government failed to lift sentiments in the stock market, which fell sharply amid volatile trading. The benchmark index of the Bombay Stock Exchange - the 30-share Sensex - tumbled 3.4 percent to 9,477 points.

The Indian stock market has been the hardest hit since global markets began sliding about a month ago on fears of higher inflation, rising interest rates and a possible slowing of the world economy. The Sensex has fallen 25 percent after hitting an all-time high of 12,612 points on May 10.

Still, India would remain among the world's fastest growing economies, with its gross domestic product expanding close to 8 percent this year. The Indian economy has averaged 8.1 percent annually in the past three years.

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