March '12 IIP drops 3.5 pc compared to March '11

India's industrial output unexpectedly contracted 3.5 per cent in March from a year earlier, government data showed on Friday.

Analysts had expected output to grow 1.5 per cent, a CNBC-TV18 poll showed. The March figure compares with February's annual increase of 4.1 per cent.

Manufacturing, which constitutes about 76 per cent of industrial production, shrank an annual 4.4 per cent from a year earlier, the statistics office said.

The overall output grew 2.8 per cent in the fiscal year that ended on March 31, much slower than 8.2 per cent in the year-ago period.

India's economy, once a key driver of growth in Asia, has slowed considerably due to surging inflationary pressures, which have resulted in high interest rates.

Growth prospects for the Indian economy have been consistently downgraded. Economists polled by Reuters cut their gross domestic product forecasts for the fifth straight quarterly poll in April.

Annual exports fell in March for the first time in four months as demand from key trade partners, Europe and the United States, weakened.

However, there are a few bright spots in the faltering Indian growth story that might boost the industrial output number ahead.

An uptick in both the manufacturing and services purchasing managers' index numbers for April offers room for optimism. So does the surprisingly sharp rate cut by the central bank at its April meeting in an effort to boost the slowing economy.