Indias Industrial Output Turns Positive Rises 01

India's Industrial Output Turns Positive, Rises 0.1%

Better result than the 0.6% contraction financial markets expected Manufacturers are clearly still struggling for momentum, amid subpar domestic demand. Production of capital goods such as plant equipment contracted by 4.2%.

NEW DELHI -- India's industrial production edged into positive territory Wednesday but the 0.1% rise posted for January was nowhere near the strong recovery the government had hoped for ahead of national elections.

The marginal increase in output by factories, mines and utilities in January from a year earlier, marked the first acceleration in four months.

It was also a better result than the 0.6% contraction financial markets expected.

"The data shows India's beleaguered economy moving in the right direction, but still far from healthy," said Capital Economics economist Miguel Chanco.

"Manufacturers are clearly still struggling for momentum, amid subpar domestic demand," he said.

Manufacturing output, which accounts for over three-quarters of the Index of Industrial Production, shrank by 0.7% in January.

Production of capital goods such as plant equipment -- a strong indicator of investment intentions -- contracted by 4.2%.

The numbers carry added weight as they are among the last key indictors about the health of the economy, before staggered elections kick off early next month in the world's largest democracy.

The government had hoped the "green shoots" of economic recovery would be clearly visible before voting took place. But the anemic output rise reflected stumbling consumer demand in the face of high interest rates, creaking infrastructure, choking productivity, and a slew of political scandals, that have discouraged investment.

The influential Confederation of Indian Industry (CII) called the increase in total industrial output, led by a strong rise in electricity production "small consolation."

"The (economic) slowdown is yet to show any visible sign of bottoming out," the industry body said.

Separate figures Wednesday showed consumer price inflation fell year-on-year to a still hefty 8.1% in February from 8.8% in January.

The government, which opinion polls suggest is headed for defeat, has forecast economic growth of 4.9% in this financial year to March but many economists expect growth in the low four-percent range. The economy expanded by 4.5% the previous year, the weakest pace in a decade -- half the blistering pace recorded in the so-called "Indian summer" of the last decade when expansion was near double-digits.

The latest data came after figures Tuesday showed India's merchandise exports fell nearly four percent in February -- the first decline in eight months, dampening hopes of an export-led economic recovery.

Still in one key piece of good news, India's current account deficit -- the widest trade measure that hit a record high last year -- has narrowed dramatically in the past few financial quarters to a four-year low.

-Penelope Macrae, AFP

Copyright Agence France-Presse, 2014

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