Jan. 12 (Bloomberg) -- India’s industrial production rose more than economists predicted, a sign consumer demand is withstanding record interest-rate increases.

Output at factories, utilities and mines increased 5.9 percent in November from a year earlier, the Central Statistical Office said in a statement in New Delhi today. Production declined 5.1 percent in October, according to previously reported data. The median of 27 estimates in a Bloomberg News survey was for a 2.1 percent gain.

Manufacturing in India and China improved in December, according to the Purchasing Managers’ Index, showing the world’s fastest-growing major economies have so far been resilient to Europe’s debt crisis. Today’s data gives scope for the Reserve Bank of India to keep borrowing costs unchanged on Jan. 24 for a second straight month to help fight inflation.

“Consumer demand is holding up even though it is weak,” Radhika Rao, an economist at Forecast Pte in Singapore, said before the report. “The RBI will have to keep rates at the current levels until inflation shows concrete signs of easing.”

Rao expects the central bank to hold the repurchase rate at 8.5 percent this month.

India’s rupee has gained 2.4 percent against the U.S. dollar this year after being Asia’s worst-performing currency in 2011, helping cut import costs and ease inflationary pressures. The BSE India Sensitive Index has climbed about 5 percent since Jan. 1 after losing a quarter of its value last year.

Inflation Trend

India’s inflation rate exceeded 9 percent every month last year, reducing purchasing power in a nation where the World Bank estimates more than three-quarters of the people live on less than $2 a day.

The Reserve Bank raised its repurchase rate by 375 basis points since the start of 2010, the fastest round of increases since the central bank was established in 1935, Bloomberg data show.

India’s benchmark wholesale-price inflation probably eased to 7.40 percent in December from 9.11 percent in November, according to the median of 23 estimates in another Bloomberg News survey.

The reading would still be higher than the levels in Brazil, Russia and China, which including India make up the so- called BRIC nations. India’s commerce ministry will unveil the data on Jan. 16. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China last month.

‘Clear Deterrent’

“An inflation rate of more than 7 percent is a clear deterrent against any rapid change in the monetary policy stance in India,” Siddhartha Sanyal, chief India economist at Barclays Plc, said before the report. He expects the Reserve Bank to start reducing rates in the second quarter this year.

China has scope to loosen fiscal and monetary policy, making it better placed than India to weather a global economic slowdown, Stephen Roach, non-executive chairman of Morgan Stanley Asia, said today.

China is bringing inflation under control and has a small budget deficit, Roach said in an interview with Bloomberg Television. In contrast, India has a currency under pressure, an “inflation problem” and a large fiscal shortfall, he said.

Higher borrowing costs in India are curbing demand in some industries such as automobiles.

India’s automakers group this week cut its estimate for annual local passenger-car sales, projecting deliveries may not grow for the first time in nine years.

Industrial output rebounded in November as cement production by companies including Ambuja Cements Ltd. rose 16.6 percent from a year earlier after stalling the previous month, according to commerce ministry data released last month. Electricity output gained 14.1 percent, while steel production gained 5.1 percent.

The Purchasing Managers’ Index in India rose to 54.2 in December, the most in six months, HSBC Holdings Plc and Markit Economics said Jan. 2. In China, the index was at 50.3 from 49 in November, the Beijing-based logistics federation said Jan. 1.

--With assistance from Manish Modi in New Delhi. Editors: Cherian Thomas, Brendan Murray

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net