NEW DELHI (Reuters) ? Industrial output grew at its slowest pace in two years in September, providing further evidence of deceleration in the economy and raising the odds of a pause in the Reserve Bank of India's 20-month-long policy tightening cycle.
Production at factories, mines and utilities grew 1.9 percent from a year earlier, sharply down from 3.6 percent a month earlier and below the median forecast for a 3.5 percent rise in a Reuters poll.
"Clearly, the cumulative impact of past monetary actions is getting unfolded," said A.K. Capital economist Shakti Satapathy, describing the data as "dismal".
The manufacturing sector, which contributes about 80 percent to the overall index of industrial production output in Asia's third-largest economy, grew an annual 2.1 percent in September.
The drag in the index of industrial production was led by a contraction of nearly 6 percent in mining. Industrial output growth was the slowest since September 2009.
"The numbers are somewhat lower than expectations, primarily due to the capital goods numberBut this growth is quite low and is quite likely to hit GDP growth down the line," said Saugata Bhattacharya, economist with Axis Bank in Mumbai.
FURTHER EVIDENCE OF A SLOWDOWN
Production of consumer non-durables fell an annual 1.3 percent. While Capital goods growth -- a barometer of investment in the economy -- contracted 7 percent, reflecting a stalling of major projects amid regulatory uncertainties and a policy paralysis that has held up major economic reforms.
Several banks have stopped lending to state power distributors as well as to property developers and road projects on worries over asset quality.
Moody's Investor Service on Wednesday downgraded its outlook for India's banking system to "negative" from "stable", as it warned of slowing growth at home and overseas hitting asset quality, capitalisation and profitability.
Weak global demand is exacerbating the slowdown in an economy whose growth this year might be well below the 8.5 percent heady pace in the fiscal year that ended in March.
Inflation remains persistently high near double-digits despite the long and aggressive monetary tightening that has taken a heavy toll on investment and consumer spending. The RBI has raised interest rates 13 times since early 2010.
Annual food inflation remains persistently high, with the index rising 11.81 percent in the week to Oct. 29 compared with 12.21 percent in the previous week, data released on Friday showed.
Friday's figures come on top of data this week showing October export growth at its slowest in two years, reflecting a demand contraction in Europe, India's largest trading partner.
Car sales also dropped 24 percent last month, their sharpest decline in more than a decade, as consumer demand sagged amid high borrowing costs.
The BSE Sensex extended losses to more than 1 percent following the data. India's new 10-year 8.79 percent, 2021 bond reacted little after the factory data, but rose as much as 5 basis points to 9 percent later on worries of fiscal slippage.
The benchmark five-year swap rate and the one year swap rates were also unmoved post the data.
WEAK FINANCES, WIDENING DEFICIT
A slowing economy is squeezing central finances and analysts are questioning the government's ability to restrict the fiscal gap for the financial year ending in March 2012 at the budgeted level of 4.6 percent of gross domestic product (GDP).
Slowing tax revenues, along with stalled share sales in state-run firms hurt by depressed market conditions, have added to the government's woes.
Many private economists see the deficit for the year overshooting the 5 percent mark. The RBI has warned of inflationary risks if the government's deficit for 2011-12 exceeds the budget target.
As headwinds to global growth gain pace, several central banks around the world have begun to cut interest rates to shield their economies.
In an acknowledgement of mounting risks to growth, the RBI last month signalled a pause in the rate tightening cycle.
Low export numbers in October have widened the trade deficit to a four-year high of $19.6 billion. The trade ministry sees the trade deficit for the full year in excess of $150 billion, but expects a slowdown in imports in the last few months of the current fiscal year.
This in turn may widen the current account deficit for the year to 3 percent of GDP from 2.6 percent last year.
The partially convertible rupee has been the worst performing currency in Asia so far this year, having shed more than 9 percent against the dollar.
(Writing by Abhijit Neogy; Editing by John Chalmers and Ramya Venugopal)
breast cancer walk detroit tigers major league major league mlk memorial mlk memorial alicia sacramone
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.