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July 13th, 2013 
Peter Nolan 
India’s industrial output shrank by a shock 1.6 per cent in May from a year ago, data shows.
Source: AAP
INDIA’S industrial output shrank by a shock 1.6 per cent in May from a year ago, data shows.
The contraction in output by factories, mines and utilities was far below market forecasts of a 1.5-per cent rise while in another blow for Asia’s third-largest economy, April’s industrial output growth was revised to 1.8 per cent from 2.8 per cent expansion earlier.
“Industrial recovery is not yet in sight – this is definitely a surprise on the downside,” said D.K. Joshi, chief economist of India’s leading credit rating agency Crisil.
The figures marked more grim reading for Prime Minister Manmohan Singh’s Congress-led government which is desperately hoping for an economic rebound before elections due in the first half of 2014.
“Industry has slipped into a serious crisis,” said business leader Rajkumar Dhoot, as the data showed manufacturing, which accounts for three-quarters of the Index of Industrial Production, had slumped by 2.0 per cent in May.
Dhoot, chief of the Associated Chambers of Commerce and Industry, predicted “large-scale job losses” in the country of 1.2 billion people and pointed to production shutdowns already announced by the once-booming car sector.
Despite the weakness, the central bank is ill-placed to cut interest rates to kickstart the economy with the rupee near lifetime lows and separate data on Friday showing retail price inflation climbing to 10.13 per cent in June from 9.65 per cent in May.
“For any policymaker, it is a very challenging time. You have urgent situations over the rupee, inflation and now manufacturing,” Joshi said.
“There is no magic wand except that the government must start implementing some of the economic reforms it has been promising,” he said.
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