Industrial output down 0.5 percent yoy

India's industrial output likely shrunk in March from a year earlier, its third fall in four months, as the global economic slowdown hit exports and domestic demand remained soft, a poll showed.

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The median forecast in the poll of 13 analysts was for an annual decline of 0.5 in the index of industrial production (IIP) in March, the final month of the 2008/09 fiscal year.

Output fell an annual 1.2 per cent in February, according to provisional figures. Output rose 0.4 per cent in January and fell 0.6 per cent in December.

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"It's going to be flattish, near the trough. Exports remain weak and domestic demand is also subdued," said D.K. Joshi, principal economist at rating agency Crisil.

Some economists expect industrial output grew less than 4 per cent in India's fiscal year that just ended in March, less than half the 8.1 per cent growth rate of the previous year.

Economists expect output growth to improve in coming months as government stimulus measures and aggressive rates cuts by the central bank take hold, with demand for consumer goods, vehicles and building materials showing signs of picking up.

Macquarie Securities said industrial growth may reverse its weaker trend from April as motor vehicles, cement and steel are already showing signs of increased activity.

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A survey of purchasing managers showed expansion of manufacturing activities in April, its first uptick in five months.

Car sales, a gauge of consumer demand, rose 4.2 per cent in April from a year earlier, but sales of trucks and buses were down 11.3 per cent.

India's factory output sharply slowed last year as high borrowing costs and the global credit crunch forced firms to delay expansion plans and then cut output as demand for goods in overseas markets fell sharply.

Policymakers say the economy may have grown less than 7 per cent in 2008/09, slowing sharply from 9 per cent or more seen in previous three years. The central bank expects the growth rate to slow further to 6 per cent in 2009/10, which would be the weakest in seven years.