India's industrial production grew at the fastest pace in seven months in October as the onset of the festival season and rising incomes spurred consumer spending.

Production at factories, utilities and mines in Asia's third-biggest economy increased 11.8 percent from a year ago, up from September's revised 6.8 percent rise, the statistics office said in New Delhi on Wednesday. Economists expected a 10 percent gain.
Demand for cars, mobile phones and other manufactured products has risen amid record salaries, spurring companies such as Metro AG and Suzuki Motor Corp. to expand operations. Consumer spending also got a boost in October as India's 830 million Hindus prepared to celebrate the Deepawali festival of lights and the nation's 140 million Muslims observed Id-Ul-Fitr, which marks the end of the fasting month of Ramadam.
“Higher inventory buildup ahead of the festivals helped industrial production stage a comeback,” said Indranil Pan, chief economist at Mumbai-based Kotak Mahindra Bank Ltd. “Exports also bounced back in October.”
The yield on the benchmark 7.99 percent note due July 2017 was little changed at 7.89 percent as of 12:04 P.M. in Mumbai, according to the central bank's trading system.
Manufacturing, which accounts for 80 percent of industrial output, gained 13.3 percent in October from a year earlier, according to Wednesday's statement. That was the quickest pace since March. Consumer-goods production jumped 12.5 percent, the most in six months.
Rising salaries
Indians got the second-highest salary increase in the Asia- Pacific region this year, helped by unprecedented economic growth. Wages rose an average 14.8 percent in 2007 from 14.4 percent last year, according to human-resources consulting firm Hewitt Associates Inc.
Accelerating industrial growth, which makes up a quarter of the $906 billion economy, helped the benchmark Sensitive Index to soar 47 percent this year, led by Bharti Airtel Ltd. and Reliance Industries Ltd., which owns India's biggest refinery.
Bharti Airtel, Vodafone Group Plc's Indian unit, and other mobile-phone operators in the world's fastest-growing major wireless market jointly added 8.05 million subscribers in October. The nation ended October with 217.14 million cell-phone users, according to the Telecom Regulatory Authority of India.
Company sales also get a fillip during the festive months of October and November as people consider it an auspicious time to make purchases.
Deepawali, the most important festival on the Hindu calendar, fell on Nov. 9 this year and Dusshera was on Oct. 21. Muslims celebrated Id-Ul-Fitr on Oct. 14.
New factories
Local sales of passenger cars in October rose 14.6 percent from a year earlier to 105,878 units, the New Delhi-based Society of Indian Automobile Manufacturers said. Sales at General Motors Corp. increased almost four times and Maruti Suzuki India Ltd. gained 16 percent.
Honda Motor Co., Volkswagen AG and half a dozen other companies plan to spend at least $6.6 billion in India on new factories to cash in on the nation's auto demand. GM is spending more than $300 million to build a second car factory in India.
“Festivities in October contributed to a revival in consumer demand,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. “Going forward, production growth is expected to moderate as previous interest-rate increases begin to have an impact.”
The Reserve Bank of India has lifted its benchmark interest rate nine times since October 2004 to fight inflation, making commercial bank loans more expensive.
Industrial output also rose as shipments of manufactured goods including gems and petroleum products increased in October at the fastest pace in 15 months. India's exports jumped 35.7 percent from a year earlier to $13.3 billion, following a 19.2 percent gain in September.
Sustaining high industrial production growth will require the creation of supportive infrastructure, Finance Minister Palaniappan Chidambaram said in a mid-year review of the economy last week.
The government estimates India will need $500 billion worth of investments in the next five years to build and upgrade its roads, ports, airports, utilities and other infrastructure if wants to accelerate growth to a 10 percent pace by 2012.
India's gross domestic product (GDP) has expanded at an average annual pace of more than 9 percent since April 2005, making it the world's second-fastest growing major economy after China.
(Source: Bloomberg)