India observes an increase in industrial output

Despite high inflation rate and global credit crunch, Indian industry sector observed a rise in its industrial output in July 2008. According to the data, industrial production rose by 7.1%. In a poll organized by Reuters, the July growth was predicted at 6.5%. IBN Live.com reports:

Industrial output is geared mostly to the domestic market, accounting for about a fifth of GDP, and economists were divided on whether it was strong enough to prompt another tightening by the Reserve Bank of India (RBI) at a rate review in October.

"Given the recent trend as far as manufacturing prices inflation is concerned there is still scope for RBI to go with that one last hike in October," says, head of Indian and ASEAN economics at Macquarie Capital Securities, Rajeev Malik.

Compared to 2007, manufacturing output increased to 7.5%, capital goods production 21.9%, consumer goods production 7.3%, and consumer durables 11.2%.

The Reserve Bank of India raised interest rates three times in June and July due to double digit inflation which resulted into a record hight 9% increase in the interest rates at which RBI lends money to the banks. The good news is that annual inflation rate, which went up by 12.6% in early August, came down to just above 12% by the end of that month which has led to considerations among economists that RBI may not increase its rates again,

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