India’s industrial output shrank by a surprise 0.4 percent in September from a year earlier, data showed on Monday, underlining the challenge for the government as it attempts to jumpstart growth with a string of reforms.
The output figure for September was sharply below market expectations of a 2.8 percent year-on-year rise and was a blow to the Congress-led government which had said it believed the economy had turned the corner.
Manufacturing output, which accounts for three-quarters of the index of industrial production contracted by 1.5 percent, while capital goods — such as factory plant equipment — plunged by 12.2 percent, the data showed.
“With the gloomy September print, the still-weak industrial production momentum confirms that industrial activity remains tentative, and overall economic momentum muted,” said Jyoti Narasimhan, economist at IHS Global Insight.
The once-booming economy has been hit by a combination of high interest rates, Europe’s debt crisis that has slowed exports, and sluggish investment.
The government announced a string of reforms in mid-September, opening up retail and other sectors to wider foreign investment and ending years of policy paralysis in a bid to spur India’s slowing economy.
Indian Prime Minister Manmohan Singh declared at the weekend that the economic “gloom and doom” hanging over the country in recent years has been dispelled and that he is determined to push ahead with further reforms.
Singh said that economic growth could be six percent in this fiscal year to March 2013, while Finance Minister P. Chidambaram has said it could be as low as 5.5 percent — the lowest level in a decade.
India’s economy needs to expand by nine to 10 percent to significantly reduce widespread poverty in the country of 1.2 billion people, economists say.
Indian industrial output shrinks surprise 0.4%
