India’s industrial output falls at the fastest pace in six years
India’s industrial output fell at the fastest pace in over six years in September, adding to a series of weak indicators that suggests the country’s economic slowdown is deep-rooted and interest rate cuts alone may not be enough to revive growth.
Annual industrial output contracted 4.3 percent in September, government data showed on Monday. It was the worst performance since a 4.4 percent contraction in February 2013, according to Refinitiv data.
Analysts polled by Reuters had forecast industrial output to fall 2 percent for the month.
“A contraction of industrial production by 4.3 percent in September is serious and indicative of a significant slowdown as both investment and consumption demand have collapsed,” said Rupa Rege Nitsure, chief economist of L&T Finance Holdings.
The industrial output figure is the latest in a series of worrying economic data in Asia’s third largest economy.
Earlier in the day, a government data showed that India’s power demand fell at the fastest pace in at least 12 years in October, signalling a continued decline in the industrial output. Electricity has about 8 percent weighting in the country’s index for industrial production.
The South Asian country needs electricity to fuel its expanding economy but a third decline in power consumption in as many months points to tapering industrial activity in a nation that aims to become a $5 trillion economy by 2024.
Economists say that weak series of data could mean economic growth for July-September period will remain near April-June quarter levels of 5 percent, which was a six-year low. The Indian government is likely to release April-September economic growth figures by the end of this month.
Subdued inflation and an economic slowdown have prompted the Reserve Bank of India (RBI) to cut interest rates by a total of 135 basis points this year.
“These are tough times for the RBI, as it cannot do much about it but there will be pressures on it to act ...Blunt tools like monetary policy may not be effective anymore,” Nitsure said.
Data showed in September mining sector fell 8.5 percent, while manufacturing and electricity fell 3.9 percent and 2.6 percent respectively. Capital goods output during the month fell 20.7 percent, indicating sluggish demand.
