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India economic woes worsen

New Delhi, January 11, 2014

India's economic woes worsened yesterday with a surprise contraction in industrial production and a wider trade deficit, adding to troubles of the ruling alliance as it heads into a tough national election seeking a third term.

Production at factories, mines and utilities shrunk for the second straight month in November, by 2.1 per cent, data from the Statistics Ministry showed, dragged down by a contraction in consumer goods output.

Analysts polled by Reuters had predicted output to grow 1 per cent.

"The November industrial production figures continue to show that the Indian industrial sector remains in recession, with clear evidence that domestic consumption remains weak," wrote Rajiv Biswas, Asia-Pacific chief economist at His.

Meanwhile, the trade deficit widened to $10.14 billion last month from $9.22 billion in November on waning exports growth, data from the Trade Ministry showed yesterday.

Merchandise exports rose 3.49 per cent year-on-year to $26.35 billion, slowing down from a 5.86 per cent pace in November.

The second successive fall in the output and slowing exports growth will likely dampen hopes for a rebound in Asia's third-largest economy that is struggling to come out of a situation that some analysts define as stagflationary. For the past four quarters, economic growth has been stuck below 5 per cent while prices are rising.

Strong exports along with a robust farm output were expected to usher in an economic revival, beginning in the October-December quarter.

The latest data may make investors more wary of committing fresh investments in an economy that recorded 9 per cent annual expansion until two years back and was widely expected to be one of the main drivers of the global economic recovery.-Reuters




Tags: economy | India |

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