The FINANCIAL — India’s industrial output growth slowed to its weakest rate in four months in September while inflation accelerated to its highest level in as many months in October, an indication of the challenges facing policy makers looking to boost growth in Asia’s third-largest economy, according to Nasdaq.
Industrial production, a measure of output in the manufacturing, mining and utilities sectors, rose 3.6% from a year earlier in September, government data showed on November 12. That fell short of the 5.0% increase predicted by economists polled by The Wall Street Journal, and was much weaker than the 6.3% rise in August.
The result could strengthen calls for India’s central bank to cut rates again before the end of the year, but with inflation ticking up for the third straight month, policy makers in New Delhi are likely to take a cautious stance, following a bigger-than-expected half-percentage-point cut in late September.
Output weakened across many sectors. Manufacturing, which has a 75% weight in industrial production, grew 2.6%, following August’s 6.6% increase. Mining growth also slowed to 3.0% from 4.2%. However, electricity production bucked the trend, rising 11.4% in September, stronger than the 5.6% increase in August.
Separate data showed consumer price inflation accelerated to 5.0% from a year earlier in October due to costlier food. That was higher than the 4.8% increase predicted by economists.
A 14% shortfall in rainfall during India’s June to September monsoon season is expected to hurt farm output and drive up food prices. The Reserve Bank of India predicts inflation will accelerate to 5.8% by January.
“Despite the uptick in inflation, we continue to believe that the RBI’s January 2016 target will be undershot by a wide margin,” said Aditi Nayar, an economist at rating firm ICRA. “Nevertheless, a rate cut in the December policy [ meeting] appears increasingly unlikely, particularly given the looming rate hike by the U.S. Federal Reserve,” she added.
Discussion about this post