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India’s industrial output unexpectedly declined in November on sluggish consumer spending, adding pressure on Prime Minister Manmohan Singh to bolster the economy ahead of elections this year. |
Output at factories, utilities and mines fell 2.1% from a year earlier after a revised 1.6% contraction in the previous month, the Statistics Ministry said in a statement in New Delhi yesterday. The median of 37 estimates in a Bloomberg News survey was for a 0.8% rise.
The central bank’s effort to control Asia’s fastest consumer price inflation by boosting interest rates has prompted the country’s 1.2bn people to cut back spending as economic growth falters. Singh is under pressure to curb government spending as rating companies threaten to downgrade India to so-called junk status.
“Industrial production data will continue to remain weak,” said Tirthankar Patnaik, a strategist at Religare Capital Markets in Mumbai. “Even though we have bottomed out, it is the recovery that we are worried about.”
The rupee, which has slid about 12% against the dollar in the past 12 months, strengthened 0.3% to 61.905 at the close in Mumbai. The S&P BSE Sensex index advanced 0.2%. The yield on the 10-year government bond maturing November 2023 fell to 8.76% from 8.79% on Wednesday.
Interest rates will remain elevated as long as surging inflation imperils economic growth, K C Chakrabarty, a deputy governor of the country’s central bank, said last week. Consumer prices climbed 11.24% in November. Wholesale inflation was 7.52%, a 14-month high, as onion prices tripled from a year earlier.
