April industrial output likely rose 2.4 percent: Reuters poll

By Rahul Karunakar

BANGALORE (Reuters) - India's industrial output probably rose for a fourth consecutive month in April, but at a slightly slower pace, a Reuters poll showed, suggesting economic recovery remains tepid.

A weaker reading of factory activity will increase the pressure on the RBI to ease monetary conditions to spur growth at its policy meeting next week while it seeks to balance risks from a high current account deficit and a weaker currency.

Production at factories, mines and utilities rose an annual 2.4 percent, after a 2.5 percent rise in March, according to a consensus forecast of 25 economists. Forecasts ranged from an expansion of 1.5 to 4.0 percent.

Although the consensus points to an expansion in factory output in the first month of the fiscal year, the pace does not suggest a strong revival in Asia's third-largest economy after it posted a decade-low growth for the fiscal year to March 2013.

India's economy turned a corner in the quarter to March, growing 4.8 percent on a year earlier, slightly faster than the upwardly revised 4.7 percent growth seen in the previous three months.

"Recent economic data suggest that growth has bottomed out, but no clear evidence yet of setting in of a cyclical revival. IIP (industrial output) growth thus likely to stay sluggish," said Abhishek Upadhyay, an economist at Axis bank.

A moderate recovery in Indian factories, exports and investments were probably the main drivers for an increase in overall growth in the quarter through March, data showed.

Encouragingly, exports rose 1.6 percent in April from a year earlier, up for the fourth straight month and capital goods output - a key barometer of investment - rose an annual 6.9 percent in March, albeit off a low base.

But in a sign of underlying weakness in the economy, output in the eight key infrastructure industries - which make up almost 40 percent of factory production - slowed to 2.3 percent year-on-year in April from a 3.2 percent expansion in March.

Investors, however, are hoping that Prime Minister Manmohan Singh's minority government finds enough strength to push through reforms to boost the economy before an election due early next year.

The Reserve Bank of India has cut its policy rate by 75 basis points this year to spur growth.

However, the central bank which meets on July 17, has warned that upside risks to inflation and a high current account deficit give it limited room for more monetary easing.

A separate poll of 16 economists showed that retail prices probably rose an annual 9.05 percent in May, down from 9.39 percent in April, offering some comfort to the central bank.

(Polling by Ruby Cherian; Editing by Sanjeev Miglani)