India's industrial production declined unexpectedly in June, marking the third decline in four months, amid persistent weakness in the domestic economy and lower external demand due to the global slowdown.
Production in the industrial sector dropped 1.8 percent annually in June, the Central Statistics Office said Thursday. The decline, which followed an upwardly revised 2.5 percent growth in May, was in contrast to the 0.3 percent growth economists had forecast.
Output in the manufacturing sector was 3.2 percent lower compared to June 2011, hurt by a 56 percent slump in the electrical machinery and apparatus segment.
Industrial activity in Asia's third largest economy is widely expected to weaken in the coming months as economic growth, which slowed to a near 10-year low in the March quarter, continues to be sluggish.
The Reserve Bank of India sees 6.5 percent growth for 2012-13. The central bank expects the slower global growth as well as a likely slowdown in service sector expansion to possibly act as a drag on the economy.
A slew of banks and brokerages have cut their forecast for India's economic growth this week on drought concerns due to the weak monsoon. Earlier today, Moody's Analytics slashed India's GDP outlook for 2013 to 6 percent from 6.2 percent, citing policy inaction and poor monsoon. The forecast for 2012 was cut to 5.5 percent.
Yesterday, Citigroup and CLSA downgraded their view of the country's growth for the current fiscal year to 5.4 percent and 5.5 percent, respectively. The research wing of Indian rating agency CRISIL trimmed its growth forecast for 2012-13 on Tuesday to 5.5 percent from 6.5 percent.
Capital goods recorded a 27.9 percent fall in June, while output of intermediate goods moved up 1.6 percent year-on-year. Consumer goods production advanced 3.5 percent.
The mining and quarrying sector posted a 0.6 percent output growth during the month, while electricity production gained 8.8 percent.
In the six months ended June, overall production was lower by 0.1 percent compared to the same period of 2011, with mining and manufacturing production falling by 1.1 percent and 0.7 percent, respectively.
Underscoring the weakness in the industrial sector, the latest purchasing managers survey showed that India's manufacturing sector expended at a slower pace in July, with output growing at the weakest pace in eight months.
The Reserve Bank of India last month kept its policy interest rates unchanged at 8 percent in an effort to maintain inflation under control.
by RTT Staff Writer
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