In­dian in­dus­trial out­put shrinks

The Pak Banker - - Front Page -

NEW DELHI

In­dia’s in­dus­trial out­put un­ex­pect­edly con­tracted on weak con­sumer de­mand in Septem­ber, adding to pres­sure for ac­tion by the gov­ern­ment with Asia’s third largest econ­omy in­creas­ingly likely to post its slow­est growth in a decade.

Data re­leased by the Cen­tral Sta­tis­tics Of­fice (CSO) on Mon­day showed out­put at fac­to­ries, mines and util­i­ties shrank an an­nual 0.4 per cent. That was sharply in con­trast with a fore­cast of 2.8 per cent growth in a Reuters poll.

Man­u­fac­tur­ing out­put, which ac­counts for the bulk of in­dus­trial pro­duc­tion and con­trib­utes about 15 per cent to over­all GDP, fell 1.5 per cent in Septem­ber from a year ago.

In­dia’s fes­ti­val sea­son, which be­gan in Septem­ber and will peak this month, was expected to bol­ster the out­put data. The sharp slump in out­put will bol­ster calls for an in­ter­est rate cut from the Re­serve Bank of In­dia to perk up the econ­omy.

“Typ­i­cally, some kind of in­ven­tory buildup also hap­pens in Septem­ber, so the num­bers are all the more dis­ap­point­ing,” said An­jali Verma, an econ­o­mist with MF Global in Mum­bai.

“Go­ing by RBI’s guid­ance, the IIP num­bers will now make a strong case for a rate cut to hap­pen in Jan­uary.”

The cen­tral bank has so far re­buffed calls for in­ter­est rate cuts, say­ing prices are still ris­ing too fast to risk loos­en­ing pol­icy much, and it also wants the gov­ern­ment to bring down a wor­ry­ingly high fis­cal deficit. The bank says ris­ing ru­ral wages, a re­sult of gov­ern­ment poli­cies, are also stok­ing in­fla- tion. The next mone­tary pol­icy re­view is due in De­cem­ber. The cen­tral bank has said any in­ter­est rate cut is “highly im­prob­a­ble” at that meet­ing, since it ex­pects price pres­sures to re­main el­e­vated fol­low­ing a hike in the price of heav­ily sub­sidised diesel in Septem­ber.

Re­in­forc­ing the cen­tral bank’s ex­pec­ta­tions on in­fla­tion, the con­sumer price in­dex rose an an­nual 9.75 per cent in Oc­to­ber, a tad faster than 9.73 per cent rise a month ago, more gov­ern­ment data showed on Mon­day.

Oc­to­ber whole­sale price in­dex data, which the Re­serve Bank of In­dia gives more weight to in set­ting pol­icy, is due to be re­leased on Wed­nes­day. A Reuters poll of economists showed whole­sale price in­fla­tion was seen ac­cel­er­at­ing to 7.96 per cent, an 11month high.

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