India's industrial production slackens for the third month

Mumbai: Growth of industrial production the country slowed for a third straight month in February as higher interest rates on personal loans hurt demand for cars and homes.

Production at factories, utilities and mines rose 11 per cent from a year earlier against an expected 12 per cent and less than January's revised figure of 11.4 per cent, the Central Statistical Organisation said in a statement.

Manufacturing output increased 12.3 per cent in February from a year earlier, according to the report. Mining grew 6.3 per cent and electricity gained 3.3 per cent.

The Reserve Bank of India (RBI) on March 30 raised the cash reserve ratio, or the amount of cash lenders must set aside against deposits, for the third time since December and increased the benchmark overnight lending rate for the sixth time in 15 months.

Commercial banks have increased their lending rates by between 200 basis points and 250 basis points in the past four months.

Rising interest rates are likely to slow India's economic growth to 8 per cent in the year ending March 31. India's economy grew 9.2 per cent in the previous year, the government estimates. Industrial output makes up a quarter of the economy.

The International Monetary Fund and the Asian Development Bank expect India's economic expansion to slow as the central bank's 2 1/2-year policy of increasing rates to combat inflation may hurt consumer spending.