India Industrial Output in March Declines as Inflation Rallies

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India Industrial Output in March Declines as Inflation RalliesIndia’s industrial production shrunk while inflation surge as Asia’s third-biggest economy grapples with apparent stagflation.

Industrial output, which comprises production of mines, factories and utilities, declined 0.5 percent in March from a year ago. This is the fifth month out of the last six months that the figure has declined. Economists surveyed by Wall Street Journal had expected the figure to contract by 1.4 percent.

Output declined by 0.1 percent in the year ending March 31, down from an expansion of 1.1 percent a year earlier.

On the other hand, consumer-price inflation surged for the second successive month in April to 8.59 percent, down from 8.31 percent the previous month.

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“Although there are signs of sequential improvement in data, the broader story still reflect stagnation in the economy,” Sujit Kumar, an economist at Union Bank of India, told Wall Street Journal.  “The fiscal math of the next government and the performance of the monsoon would be the key determinants of how strong a recovery takes shape this year.”

India’s national elections, which started on April 7, ended on Monday. Economists are speculating that the party that wins the elections will roll out economic reforms aimed at fixing the sluggish local economy. The country’s economy has taken a hit from several factors such as slow infrastructural development, high inflation and general lack of a sense of urgency from the ruling party to address the concerns. This has resulted in weak consumer demand and sluggish business investment.

The economic growth has failed to exceed 5 percent over the last seven quarters, which is a very poor showing from an economy that grew at nearly 9 percent in 2011. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com