NEW DELHI: A raft of data released on Friday indicated grim tidings for the Indian economy, increasing the pressure on the beleaguered Congress-led government, which will have to face elections in less than a year. Industrial production contracted 1.6% in May, exports fell 4.6% in June while retail inflation accelerated to 9.87%, reversing three months of decline and effectively ruling out a cut in interest rates to stimulate demand. "There are no recovery signals at all, things are as grim as they were," said AbheekBarua, chief economist at HDFC Bank. The only silver lining in the clutch of data released on Friday was that trade deficit fell to a three-month low of $12.2 billion from $20.1 billion in May because of a sharp fall in gold imports after the government raised import duties and made bullion imports unattractive. "The first quarter of the current fiscal will be worse than the previous quarter, as consumption demand has started to come down," said Pronab Sen, chairman of the National Statistical Commission. The contraction in industrial production and exports shows India faces the double whammy of weak domestic and foreign demand, but the rise in inflation because of steadily increasing fuel prices, combined with the rupee depreciation, has severely limited the options before RBI and government as it is difficult to cut rates. The Indian currency closed at 59.56 to a dollar, up marginally from Thursday. "It is clear that RBI will not ease interest rates as the rate of inflation has gone up. It will keep interest rates up till the rupee continues to slide", said Madan Sabnavis, chief economist, CARE Ratings. The Indian economy expanded at a decade-low growth rate of 5% in 2012-13 and most estimates for the current year have drifted down from over 6% to now around 5.8%. Industrial growth for April was revised down to 1.9% from 2.3% estimated earlier. Manufacturing sector, which has a 76% weight in the Index of Industrial Production ( IIP), contracted 0.2% as consumers seemed to have cut down on spending while mining output, which has been hit by country-wide bans, fell 5.7% in May. Electricity production rose 6.2%.
Posted on: Sun, 14 Jul 2013 16:12:01 +0000
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