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India's Industrial Output Only Grows 2%

Nov. 12, 2013
Manufacturing output as a whole only rose 0.6% while production of factory equipment tumbled by a massive 6.8% from a year earlier.

NEW DELHI -- Hit by weak demand during the normally high-spending religious festival season, India's industrial output grew by a slower- than-expected 2% in September from a year earlier, data showed Tuesday.

The increase undershot consensus market expectations of a 3.5% rise and was a far cry from the double-digit increases India enjoyed for large parts of the last decade when the economy was booming.

Hopes of a big ramping-up of production for India's religious festival season, when it is considered auspicious to buy everything from cars to gold to electronic appliances, failed to materialize.

The figures sparked dismay from business groups.

"The performance of consumer goods, particularly that of consumer durables, continues to be a cause for concern as it indicates very poor demand," said the Confederation of Indian Industry.

Manufacturing output, which accounts for over three-quarters of the Index of Industrial Production, rose a scant 0.6% in September from a year earlier.

Production of capital goods such as factory equipment -- a key signal of investment intentions -- tumbled by a massive 6.8% from a year earlier.

"Industrial activity in India remains weak, reflecting the parlous state of domestic confidence and demand," said Moody's Analytics in a note to clients.

"Demand for consumer durables and capital goods is still soft, mirroring poor consumer and business confidence," the research house added.

Exports have picked up on the back of a depressed rupee, climbing 13.67% to $27.27 billion in September from a year earlier, figures Monday showed.

But economists say higher overseas sales can only help the economy at the margins since growth in the nation of 1.2 billion people is still mainly domestically driven.

Despite calls by business to boost the economy, the central bank last month raised its key lending rate for a second time in as many months to try to curb inflation. The weak output data came as separate figures showed that consumer price inflation last month crossed 10%.

Consumer price inflation, increasingly watched by economists along with the main Wholesale Price Index, climbed to 10.09% in September from 9.84% a year earlier. The rate fuelled expectations of another interest rate increase, economists said.

Copyright Agence France-Presse, 2013

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