“India’s industrial output unexpectedly slid in December for a second month as demand falters in an economy expanding at the weakest pace in a decade.
Production at factories, utilities and mines fell 0.6 percent from a year earlier, compared with a revised 0.8 percent drop in November, the Central Statistical Office said in a statement in New Delhi today. The median of 29 estimates in a Bloomberg News survey was for a gain of 1 percent.
India’s elevated inflation of more than 7 percent has limited the extent its central bank can cut interest rates to boost demand, while an uneven global recovery has hurt exports. Finance Minister Palaniappan Chidambaram, who unveils the budget Feb. 28, has pledged spending curbs to ease price pressures amid wider government efforts to encourage a revival in investment.
“This set of data is really bad and there is a need to aggressively address risks to growth,” said Rupa Rege Nitsure, an economist at Bank of Baroda in Mumbai. The report adds to the case for a reduction in borrowing costs, though the magnitude of cuts depends on the path of inflation, she said.
Prime Minister Manmohan Singh has stepped up efforts to spur the economy since mid-September, opening industries such as retail and aviation to more foreign investment and setting up a panel to speed up infrastructure projects. India has also eased caps on capital inflows and moved to limit fuel subsidies.
The rupee has risen about 2.8 percent against the dollar since then, while remaining 8.4 percent weaker in the past year. The currency was down 0.1 percent to 53.925 as of 12:49 p.m. in Mumbai, while the BSE India Sensitive Index climbed 0.3 percent. The yield on the 8.15 percent note maturing June 2022 rose two basis points, or 0.02 percentage point, to 7.88 percent.