India’s industrial output slows, highlights challenges for economic recovery

Manufacturing gains inhibited from faster growth by drops in production of commercial vehicles and machinery.

April 12, 2013
by The Canadian Press

MUMBAI, India – India’s industrial production slowed in February, highlighting challenges to a recovery in Asia’s third-largest economy.

The government said that industrial output grew 0.6% over the same month the previous year after expanding 2.4% in January.

Manufacturing expanded 2.2%, inhibited from faster growth by drops in production of commercial vehicles and machinery.

The report does not reflect any solid trend of economic expansion because most of the manufacturing growth was due to sharp spikes in small, volatile sectors, according to analysts with Barclay’s Research.

They added that the continued sluggish production lends weight to arguments for the Reserve Bank of India to further cut interest rates to try to pump money into the economy. The central bank has already cut rates twice this year.

The Indian government has forecast the slowest economic growth in decade for the fiscal year that ended in March. It expects GDP to have expanded 5% compared with robust growth rates of 8 to 9% a few years ago.

India’s economic growth has been hurt by a slowdown in investment amid government instability and delayed reforms. Many forecasters expect a modest acceleration in growth this year.

The Asian Development Bank forecast India’s economy would grow 6% this year, but said it might fail to reach that level if the government does not follow through on planned reforms to encourage investment.

Among those measures are easing restrictions on foreign investment in India’s insurance industry and pension funds, plus a land acquisition bill that would ease the regulatory burdens for building roads, factories and other projects.

©The Canadian Press