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Industrial output growth contracts by 1.8% in October

Last Updated: Thursday, December 12, 2013 - 21:01

Zee Media Bureau

New Delhi: India's Industrial output growth contracted by 1.8 percent in October, a sign the economy remains fragile despite a modest rebound in the September quarter.

The factory output had expanded by 2 percent in September, as per the data released by Central Statistical Organisation.

The manufacturing sector, which constitutes about 76 percent of industrial production, declined by 2 percent from a year earlier.

Capital goods production, a barometer for investments in the economy, however, grew 2.3 percent.

The cumulative growth for the period April-October 2013-14 over the corresponding period of the previous year remained flat.

The IIP data comes on the heels of a marginal pickup in economic growth in the last quarter from a four-year low.

Asia's third largest economy expanded an annual 4.8 percent in the quarter through September, raising hopes for stronger growth in coming quarters.

Hopes of an economic recovery are reliant on higher rural consumer spending after a strong monsoon raised farm output and a rebound in merchandise exports. But they are not enough to take growth back to the 8 percent rate the government says is needed to reduce poverty and generate jobs.

Economic growth virtually halved in two years to 5 percent in the fiscal year that ended in March - the lowest level in a decade.

A yawning current account deficit, slow structural reforms and falling confidence among foreign investors underline the difficulty facing policy makers trying to foster a sustainable rebound in growth.

Stubbornly high inflation, led by runaway vegetable prices, is denting domestic demand by keeping household and corporate budgets under pressure. It has also forced the central bank under Raghuram Rajan to raise interest rates at the last two meetings.

With growth stuck below 5 percent and prices rising at a fast clip over the last four quarters, some analysts have voiced concerns that India's economy was in the grip of stagflation.

First Published: Thursday, December 12, 2013 - 17:31
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