Updated :
Friday May 11 , 2012 3:34:28 PM
India s industrial output unexpectedly fell in March for the first time in five months, driven by a slump in the capital goods sector, and increasing the pressure on policymakers to consider further steps to revive a sagging economy.
Annual production at factories, mines and utilities shrank 3.5 percent in March from a year earlier, government data showed on Friday.
Analysts had expected the output to grow 1.5 percent, a Reuters poll showed. The March figure compares with February's annual rise of 4.1 percent.
"Concern over economic growth has increased after the dismal IIP (index of industrial production) data, and it should prompt the RBI (Reserve Bank of India) to go for a further reduction in interest rates from June," said Arun Singh, a senior economist at Dun & Bradstreet in Mumbai.
"I see another 100 basis points cut in the repo rate by March 2013."
Persistent supply bottlenecks in sectors such as energy, infrastructure, minerals and labour have shaved off India's growth potential, seen in recent years as one of the drivers of the world economy.
Annual economic growth probably dropped from a near 8.5 percent to sub-7 percent in the last fiscal year, which many consider to be the new trend growth rate for Asia's third-largest economy.
Capital goods production, an indicator of investment in the economy, slumped 21.3 percent from a year earlier, data on Friday showed.
To revive the economy, the central bank lowered its main lending rate - - for the first time in three years by a sharper-than-expected 50 basis points to 8.00 percent last month.
A two-year long struggle against high inflation forced the Reserve Bank of India (RBI) to raise interest rates by 375 basis points between 2010 and 2011. Although the headline inflation has moderated below 7 percent, the central bank expects a "challenging" scenario going ahead.
Policy flip-flops are not helping either. A recent government move to check tax evasion led to a flight of foreign capital from domestic financial markets, plunging the rupee.
The currency has depreciated almost 9 percent since March against the U.S. dollar and on Thursday the central bank took regulatory measures to support the rupee. The government has since deferred the tax measure.
Friday's data showed that manufacturing output, which constitutes about 76 percent of industrial production, fell an annual 4. 4 percent from a year earlier compared with a revised annual 3.9 percent growth in the previous month.
Mining production shrank 1.3 percent in March from a year earlier as regulatory hurdles including environment hobbled investment in the sector.
Electricity generation rose 2.7 percent from a year earlier, much slower than the 8.0 percent rise in the previous month.
India s industrial output unexpectedly fell in March for the first time in five months, driven by a slump in the capital goods sector, and increasing the pressure on policymakers to consider further steps to revive a sagging economy.
Annual production at factories, mines and utilities shrank 3.5 percent in March from a year earlier, government data showed on Friday.
Analysts had expected the output to grow 1.5 percent, a Reuters poll showed. The March figure compares with February's annual rise of 4.1 percent.
"Concern over economic growth has increased after the dismal IIP (index of industrial production) data, and it should prompt the RBI (Reserve Bank of India) to go for a further reduction in interest rates from June," said Arun Singh, a senior economist at Dun & Bradstreet in Mumbai.
"I see another 100 basis points cut in the repo rate by March 2013."
Persistent supply bottlenecks in sectors such as energy, infrastructure, minerals and labour have shaved off India's growth potential, seen in recent years as one of the drivers of the world economy.
Annual economic growth probably dropped from a near 8.5 percent to sub-7 percent in the last fiscal year, which many consider to be the new trend growth rate for Asia's third-largest economy.
Capital goods production, an indicator of investment in the economy, slumped 21.3 percent from a year earlier, data on Friday showed.
To revive the economy, the central bank lowered its main lending rate - - for the first time in three years by a sharper-than-expected 50 basis points to 8.00 percent last month.
A two-year long struggle against high inflation forced the Reserve Bank of India (RBI) to raise interest rates by 375 basis points between 2010 and 2011. Although the headline inflation has moderated below 7 percent, the central bank expects a "challenging" scenario going ahead.
Policy flip-flops are not helping either. A recent government move to check tax evasion led to a flight of foreign capital from domestic financial markets, plunging the rupee.
The currency has depreciated almost 9 percent since March against the U.S. dollar and on Thursday the central bank took regulatory measures to support the rupee. The government has since deferred the tax measure.
Friday's data showed that manufacturing output, which constitutes about 76 percent of industrial production, fell an annual 4. 4 percent from a year earlier compared with a revised annual 3.9 percent growth in the previous month.
Mining production shrank 1.3 percent in March from a year earlier as regulatory hurdles including environment hobbled investment in the sector.
Electricity generation rose 2.7 percent from a year earlier, much slower than the 8.0 percent rise in the previous month.
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