New Delhi, Jan.12 (ANI): The Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, has said that India’s industrial output unexpectedly shrank in November for statiscal reasons.
The index of industrial production fell 0.1 percent annually in November, data released by the Central Statistics Office, compared with revised growth of 8.3 percent in October. Output has grown in just three of the last eight months.
The outturn was even worse than the 0.7 percent growth, analysts had predicted for November.
Output was depressed by the Diwali holiday, which was in November last year, whereas in 2011 it fell in October. Diwali is one the biggest Hindu festivals in India, with many factories shutting for several days.
Ahluwalia said: “I think is that the industrial growth on average of 4 percent compare to an average of 3 percent last year, not very strong, I mean that is very clear but the limited point that I think, we should make is this data does not contradict the proposition that the economy has bottom downed. It now needs to move upward, I would not put too much weight on just the November data, I think, you need to wait to see December is like.”
Still, Friday’s data underscores the challenge Prime Minister Manmohan Singh faces turning the wheel on the economy.
GDP growth that once looked set to hit double-digits has been stuck below 6 percent for the past three quarters. The slowdown is worrying for the government as it prepares for a series of state elections and a general election due in 2014.
The government, however, could take some heart from the trade data for December, which showed the pace of contraction was slowing down in the exports sector, which accounts for one-fifth of India’s gross domestic product.
“December 2012 also has been very disappointing month. The growth in December, the export performance in year 2012 December as compared to December 2011 has fallen by about 2 percent points. The deficit, which was 5.9 percent up to April to November has now become minus 5.5 percent, so deficit has reduced on export front,” said Trade Secretary S.R. Rao.
Merchandise exports fell to USD 24.88 billion in December, down 1.9 percent from a year earlier. Imports, however, rose 6.3 percent to USD 42.5 billion.
The trade deficit narrowed to USD 17.7 billion in December from USD 19.3 billion in November. That brought the deficit for the first nine months of the fiscal year to USD 147.2 billion, widening from USD 137.3 billion at the same point in the previous year.
India’s current account deficit hit an all time high of 5.4 percent of gross domestic product in the July-September quarter on a widening trade gap, putting the rupee under pressure.
The rupee was the third worst performer in Asia in 2012, losing 3.5 percent against the dollar for a second straight yearly loss, even though net portfolio inflows into Indian stocks were the highest in the region.
This reliance on volatile foreign capital inflows to bridge the gap is regarded as a serious faultline in the economy, haunted by memories of the 1991 balance of payment crisis when the central bank sent 47 tonnes of gold to Europe as collateral for a loan to avert a sovereign default.
Having been pilloried earlier for inaction as economic growth slumped, Prime Minister Manmohan Singh has launched a slew of bold measures since late last year that included cutting fuel subsidies, hiking rail passenger fares and opening the retail sectors to foreign players.
Still, investments are showing little signs of an upturn. Capital goods production, seen as a guide to investment levels, has grown just once in the last eight months. In November, it shrank an annual 7.7 percent. (ANI)