Industrial output growth likely slowed in February; March inflation subdued

Domestic industry growth slowed for a third month running in February, and while March retail inflation picked up slightly it remained below the Reserve Bank of India's (RBI) target, a Reuters poll of economists found.

Weaker growth and inflation below the RBI's goal of 6 per cent by January 2016 would give the central bank room to ease policy further in 2015 to spur activity.

The survey of 17 forecasters predicted the country's industrial production (IIP) increased 2.4 per cent in February from a year earlier, below January's 2.6 per cent.

Much of the deceleration can be attributed to a four-month low in production among core industries.

Infrastructure output growth - which accounts for nearly 40 per cent of overall factory production and comprises key industries like coal, cement, steel and electricity - slowed to 1.4 per cent in February.

Demand has also been hurt by a resilient rupee currency, which has made exports more expensive. It has gained over 1 per cent against the dollar this year compared to a widespread weakening among many currencies.

"Exports have been pretty bad for the last three to four months partially because of a strong appreciation of the rupee. It has been a key drag on IIP for quite sometime," said Bhupesh Bameta, economist at Quant Capital.

The median of 25 economists said India's consumer price inflation picked up slightly to 5.5 per cent last month from February's 5.37 per cent.

"A few points up and down (in the inflation rate) is more to do with a recent supply disruption in food. Otherwise there is no other factor which signals that it is going up," said Sujit Kumar, economist at Union Bank of India.

Kumar said room for more policy easing by the RBI this year is limited since inflation will probably average just below target and there is uncertainty over when the U.S. Federal Reserve will hike rates.

The RBI has cut rates twice in 2015 at unscheduled monetary policy meetings and a separate survey conducted before the RBI's last policy review on April 7 predicted two more cuts by end-2015.

(Reuters)