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India Industrial Production Grows; Inflation Eases

India's industrial production increased much faster-than-expected in April and consumer price inflation slowed more-than-expected in May, boosting hopes of better prospects for the economy after the new government took charge late last month.

Industrial production rose 3.4 percent year-on-year in April, data from the Central Statistics Office showed on Thursday, exceeding economists' expectations for a 1.9 percent gain. In March, output grew a provisional 0.5 percent.

Manufacturing output grew 2.6 percent, while mining production increased 1.2 percent. Electricity output rose 11.9 percent.

A separate release from the agency showed that consumer price inflation eased to 8.28 percent in May from 8.59 percent in April. Economists had forecast an inflation figure of 8.40 percent.

"Today's figures on Indian industry were the most positive in many months," Capital Economics Chief Asia Economist Mark Williams said.

"These data are volatile though and don't yet provide convincing evidence that the sector has finally turned a corner."

Further, Williams said policymakers are unlikely to loosen policy just yet, despite headline inflation skimming the Reserve Bank's January 2015 inflation target of 8 percent for the past four months.

In June, the central bank, led by Governor Raghuram Rajan, left the key policy rate unchanged for a second straight month on expectations of slowdown in inflation and the currency gaining strength.

Figures from the Commerce Ministry yesterday showed that exports grew a robust 12.4 percent annually in May. The latest purchasing managers' survey from Markit Economics showed that the factory sector continued expansion in May.

The positive readings for the economy comes ahead of the presentation of the budget by the new Finance Minister Arun Jaitley next month.

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