India industrial output soars 16.8% on year
Official figures have revealed further evidence of a strong recovery within India’s economy after industrial output surged by 16.8% in December compared with a year earlier – beating analysts expectations.
According to analysts, the Government is likely to withdraw its stimulus measures as a result of the strong performance. The country’s central bank has injected in excess of £80 billion in to the economy since September 2008.
“We are going to see some rollback of fiscal stimulus in the 26 February federal budget,” said Rahul Bajoria at Barclays Capital.
“The need to support the manufacturing sector through duty cuts is no longer there,” he added.
Last week, the Indian Government announced that the economy is expected to expand 7.2% in the year to the end of March.
The economy expanded at an annual pace of 7.9% in the three months to the end of September, after growing 6.7% in the year to the end of March 2009.
Meanwhile, analysts believe that India will see a rise in interest rates sooner rather than later, in order to dampen inflation.
Last month, the central bank increased cash reserve requirements for lenders in an attempt to control rising prices.