India’s industrial growth crashes into negative terrain

[Naveed Yaseen]

NEW DELHI: India’s industrial growth unexpectedly shrank for the first time in 15 years, data showed on Friday, hit by the widening global recession that has weakened demand in Asia’s third-largest economy.

Industrial production contracted by 0.4 per cent in October after expanding by 12.2 per cent in the same month a year earlier, government figures showed. Output grew by a revised 5.45 per cent in September. Industrial production has been falling in Asia’s third-largest economy as a result of the worldwide economic downturn, but analysts had been expecting output growth in October of at least two per cent.

“The industrial sector and indeed the economy as a whole has been softening for some time and the situation is deteriorating more rapidly now,” said HSBC economist Robert Prior-Wandesforde.

Until recently India believed it would escape the brunt of the global financial turmoil thanks to its vast domestic market of more than 1.1 billion people and relatively small exposure to world trade. But a slew of data has shown its economy fast losing steam.

Output turned negative as Indian companies worked off inventories built up in anticipation of October’s normally free-spending religious festival season that proved disappointing with lower sales of cars and other items. Steel, automobile and other sectors have been announcing production cuts in the face of weakening domestic and overseas demand.

The negative growth reflected “a combination of factors including the developed world recession, the lagged effects of previous rate rises in India and the emergence of a credit crunch in the country,” Prior-Wandesforde said.

Earlier this week, car sales posted their biggest annual fall in eight years, tumbling 19.38 per cent in November while sales of trucks and other commercial vehicles, a key signal of future economic activity, slumped by 49.52 per cent.

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