India's industrial output growth weakened sharply in April, and missed economists' expectations, as demand remained subdued both in the domestic market and overseas, indicating a further slowdown in activity after economic growth plunged to a decade-low in the year ended March 2013.
Further, the Indian rupee's fall to an all-time low of 58.9855 against the dollar on Tuesday, prompted the central bank to intervene in the currency market to contain the depreciation. The government plans to ease foreign direct investment rules as part of its efforts to strengthen the currency.
Industrial production increased 2 percent on an annual basis in April, slower than the revised 3.4 percent gain seen in March, the Central Statistics Office said. Economists had forecast the growth rate to stay unchanged at the previous month's originally reported 2.5 percent.
In a separate report today, the statistical office said that India's consumer price inflation eased slightly to 9.31 percent in May from 9.39 percent in April. Inflation was influenced by a 10.65 percent rise in food prices and 8.55 percent gain in costs of fuel and light.
Manufacturing output rose 2.8 percent annually, with thirteen out of the twenty-two industry groups logging positive growth during the month. Electricity production rose 0.7 percent, while output in the mining sector dropped by 3 percent.
Among industrial sub-sectors, basic goods production rose 1.3 percent from a year earlier, and capital goods output advanced 1 percent. Production of intermediate goods and consumer goods rose by 2.4 percent and 2.8 percent respectively from April 2012.
During the April 2012-March 2013 period, overall industrial output advanced 1.1 percent from the corresponding period a year earlier, data showed.
Data published by Markit Economics this month showed that activity in the Indian manufacturing sector weakened further in May. The purchasing managers index fell to a 50-month low of 50.1 from April's reading of 51, indicating that the sector has reached near-stagnation levels.
During the fiscal year ended March 2013, the economy expanded 5 percent, much slower than the 6.2 growth recorded in 2011-12, hurt by dwindling demand in the export market, high inflation and weakening investment.
Huge current account deficit on oil and gold imports has been restraining monetary easing. But, the Reserve Bank of India lowered its key rates by a quarter point thrice this year to revive flagging economic growth. The central bank expects baseline GDP growth for 2013-14 at 5.7 percent.
In May, Standard & Poor's maintained its negative outlook on India's 'BBB-' rating, indicating at least a one-in-three chance of a downgrade within the next twelve months. If government reforms fail to lead economic growth to recover to levels experienced earlier this decade, the agency warned of rating downgrade.
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