Shock fall in Indian output and exports
new delhi — India’s economic gloom deepened on Friday with a surprise contraction in industrial output, a fall in exports and a jump in the trade deficit, underscoring the enormity of challenges awaiting a new government that takes over in May.
Economic growth in Asia’s third largest economy has almost halved to below five per cent in the past two years on weak investments and consumer demand, in the worst slowdown for the south Asian nation since the 1980s.
Friday’s government data, which measures production at mines, utilities and factories, provided no relief.
A continuing slump in capital and consumer goods sectors resulted in a surprise 1.9 per cent annual contraction in industrial production in February, which compares with analysts’ median forecast of 0.9 per cent growth.
Manufacturing fell 3.7 per cent year-on-year in February. Industrial output has fallen in four of the last five months.
“Both consumer demand and investment conditions seem to be weakening, thereby further dampening the outlook for manufacturing,” said Arbind Prasad, director general of FICCI, one of India’s industry chambers.
In other data on Friday, merchandise exports fell for a second straight month in March, widening the trade deficit to a five-month high. The trade gap in March widened to $10.51 billion, its highest since October 2013, data from the Ministry of Commerce and Industry showed on Friday. Overseas sales of Indian goods fell 3.15 per cent from a year earlier to $29.58 billion in March.
Merchandise exports for the 2013/14 fiscal year, however, grew 3.98 per cent on year to $312.36 billion. Together with an 8.11 per cent decline in annual imports, that helped sharply narrow the country’s full-year trade shortfall to $138.59 billion from $190.34 billion a year ago.
Ratings agency Fitch, which affirmed India’s sovereign credit ratings at ‘BBB-’ with a stable outlook on Friday, reckons its economic fortunes will remain uncertain until the elections are over.
Capital goods output, a proxy for capital investment, shrank for a third straight month in February, falling by an annual 17.4 per cent.
India’s wobbly economy has made it vulnerable to any shift in capital flows.
As a result of curbs on gold, annual gold and silver imports dropped 40 per cent to $33.5 billion, helping shrink the full-year current account deficit to around $35 billion, two per cent of GDP, from $88 billion, or 4.8 per cent, a year ago.
Indian gold imports, however, likely jumped last month from around 25 tonnes in February after the central bank allowed more private banks to ship the metal.