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March industrial output seen slowing further: Poll

India's industrial output grew at a sharply slower pace in March thanks to a cooling infrastructure sector, a Reuters poll showed, underscoring the wider economic gloom in the country.

India's industrial output grew at a sharply slower pace in March thanks to a cooling infrastructure sector, a Reuters poll showed, underscoring the wider economic glo

om in the country. That would be in line with the findings of a purchasing managers' survey that showed India's factory sector expansion slowed for the third consecutive month in March.

Infrastructure sector output, a core component of the wider industrial output, grew by a meager 2 per cent in March, much less than the 6.9 per cent in the previous month.

The sector accounts for around 38 per cent of overall industrial output and trends in infrastructure data are typically reflected in the headline number.

"The core sector data shows that there has been a substantial slowdown in quite a few important segments of industries," said Madan Sabnavis, chief economist at CARE Ratings, forecasting IIP at 2.7 per cent.

India's economy, once a key driver of growth in Asia, has slowed considerably due to surging inflationary pressures, which have resulted in high interest rates.

A sustained pick-up in industrial output is not yet in sight, economists say. The industrial output data for March will be announced on May 11, 2012.

"The growth of industrial production is likely to remain highly dampened going ahead, led by slack in investment activity owing to the elevated interest rates," said Arun Singh, senior economist at Dun & Bradstreet.

His views were similar to those of CARE Ratings' Sabnavis, who is not expecting IIP to cross the 3.5 per cent mark for the year.

Growth prospects for the Indian economy have been consistently downgraded. Economists polled by Reuters cut their gross domestic product forecasts for the fifth straight quarterly poll in April.

Annual exports fell in March for the first time in four months as demand from key trade partners, Europe and the United States, weakened.

However, there are a few bright spots in the faltering Indian growth story that might boost the industrial output number ahead.

An uptick in both the manufacturing and services purchasing managers' index numbers for April offers room for optimism. So does the surprisingly sharp rate cut by the central bank at its April meeting in an effort to boost the slowing economy?

"Overall, we do see some improvement (in IIP) going forward but it will not be a very sharp reversal," said ING Vysya economist, Upasna Bhardwaj, who is forecasting IIP growth of 2.8 per cent for March.

"The policy inertia that has set in, there has to be some movement on that front as well to really see a substantial improvement in industrial activity."

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