India said on Tuesday (Aug 12) industrial output expanded by an unexpectedly slow 3.4 per cent in June from a year earlier while inflation accelerated, dimming prospects of a quick economic recovery.
The growth in output by India’s mines, factories and utilities marked the third straight month of industrial expansion in Asia’s third-largest economy. But the 3.4-per cent annual growth in June undershot market forecasts of a 5.2-per cent rise and was lower than the 4.7 per cent increase logged in May.
In other bad news for the new right-wing government, hoping to steer the country out of its longest period of sub-five per cent growth in a quarter-century, consumer price inflation also picked up pace.
Consumer prices rose 7.96 per cent in July from a year earlier, far above the six-per cent target set by the hawkish central bank and exceeding the previous month’s revised 7.46-per cent rise. The higher-than-expected consumer inflation means that the central bank will have less room to ease high interest rates to spur economic growth.
The economy grew by 4.7 per cent in the financial year to March 2014, its second consecutive year of sub-five-per cent growth.
The Bharatiya Janata Party government led by Prime Minister Narendra Modi that took power in late May has been hoping to see “green shoots” of recovery. Modi won the biggest parliamentary majority in three decades after campaigning on a platform to revive the economy.
Some economists have warned that it will take time for companies to ramp up expansion plans and for consumers to regain confidence. Still, economists are hoping that an upturn in the global economy will create more demand for Indian exports.
Modi also has been seeking to sweep away bureaucratic and other hurdles to foreign investment that is urgently needed to upgrade dilapidated ports, roads and other infrastructure.
Source : Channel News Asia | August 12, 2014