India Factory Output down by 0.4 percent in October

Data released friday shows that India’s economy could expand at a much lower page than expected and that the industrial output may have contracted by 0.4%, the first time in the last 15 years. This has been attributed to both a domestic and external demand for goods produced by Indian companies.The sharp fall is likely to increase pressure on the government and the Reserve Bank of India (RBI) to undertake another round of policy measures to boost domestic demand.

Data released by the Central Statistical Organisation (CSO) on Friday showed that in the first seven months of this fiscal year (April-October), the Index of Industrial Production (IIP) grew 4.1% compared with 9.9% during the same period a year ago.

The output of the manufacturing sector, which accounts for around 80% of IIP, shrank 1.2% in October, while those of the electricity and mining sector rose 4.4% and 2.8%, respectively. And while the output of intermediate goods and consumer goods companies fell, those of companies in the basic and capital goods sectors registered weak growth.
Economists here do not expect the factory output numbers to get better in a hurry.

“Industrial production may somehow perform better in coming months. But for a country like India, any sub-5% growth in industrial output is pathetic. Industry should grow at around 9-10%,” said Dharmakirti Joshi, principal economist with credit rating agency Crisil Ltd. His estimate of industrial output in 2008-09 is 5%.