Business

India's industrial output grows less than forecast

  • 12 June 2012
  • From the section Business
Workers at a factory in India
Weaker-than-expected factory output is the latest in a series of bad news to hit the Indian economy

India's industrial output rose by less than expected in April, adding to concerns about the health of the country's economy.

Output rose by 0.1% from a year earlier, much less than projected growth of 1.7%.

It comes a day after ratings agency Standard & Poor's warned that India may lose its investment grade status.

Analysts said the weak numbers may prompt the central bank to introduce fresh measures to boost growth.

"The data clearly points to industrial growth being extremely weak, and it is in clear need of monetary as well as fiscal support," said Abheek Barua, chief economist at HDFC Bank.

"There is a case for a sharp move from the Reserve Bank of India."

India's Finance Minister, Pranab Mukherjee, said the latest numbers were "disappointing" and that the government needed to "take steps to give positive signals".

Political differences

The weak output numbers are the latest in a series of bad news for India.

Data released last month showed that its economy grew at an annual rate of 5.3% in the first quarter, the slowest rate in almost a decade.

A widening trade gap and poor investment were among the key contributors to slowing growth.

At the same time, the country has been hurt by the sliding value of its currency. The Indian rupee has fallen by almost 25% against the US dollar in the past 12 months.

To make matters worse, political differences have delayed the introduction of key reforms.

The combination of these factors resulted in Standard & Poor's (S&P) warning on Monday that "slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment grade rating".

"The paramount political power rests with Sonia Gandhi, who holds no cabinet position, while the government is led by an unelected prime minister, who lacks a political base of his own," S&P said.

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