It’s pouring bad news for the economy with industrial production, exports and imports contracting and consumer price inflation inching closer to the double digit mark.
Industrial output fell 1.6% in May due to lower manufacturing and mining activity, leaving power generation as the only segment where there was higher production. What will add to policymakers’ headache is the poor show by the manufacturing sector, as buyers cut down on consumption of almost everything — from basic goods to durables and consumer goods. With demand staying weak, capital goods production shrank 2.7% in May, indicating that companies are not investing in expanding capacity.
It was the first time in five months that industrial activity fell in negative zone, prompting economists to warn of an adverse impact on first quarter economic growth.
Even before industrial production data was released, commerce ministry said exports fell over 4.5% to $23.7 billion in June, the second straight month of decline.
The only positive that emerged was a lower trade deficit, estimated at $12.2 billion, which was attributed to lower gold and silver shipments into the country after the government unleashed a series of steps to tame the widening trade deficit. As a result, imports too fell 0.4% to $36 billion.
The government released the industrial production and retail inflation data after market hours as it did not want to upset market sentiment further. In any case, the numbers provided little cheer, as consumer price inflation was estimated at 9.87% in June, compared to 9.31% in the previous month.
With elections in key states and general elections a few months away, the government could n’t have asked for worse numbers as food inflation climbed to 11.84% in June, from 10.65% in the previous month.
The rupee depreciation of over 11% since start of the current financial year is going to make inflation look worse. Economists warned that there is little demand in the economy.
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