India's industrial output shrinks at fastest rate in more than six years

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Workers make pipes used for drilling, at a factory in an industrial area in Mumbai, January 29, 2018. REUTERS/Danish Siddiqui/Files

 

NEW DELHI, October 12 (Reuters): India’s industrial output shrank at its fastest rate in more than six years in August, reflecting the impact of an economic slowdown that could prompt the central bank to cut its key policy rate for the sixth time in December.

 

Annual industrial output contracted 1.1% in August compared with 4.6% growth in the previous month, government data showed on Friday. It was the worst performance since a 1.7% contraction in November 2012, data compiled by the Statistics ministry showed.

 

Analysts polled by Reuters had forecast industrial output for the month to have grown at 1.8%.

 

Subdued inflation and an economic slowdown have prompted the Reserve Bank of India (RBI) to cut interest rates by a total of 135 basis points this year, including a 25-basis-point cut last week, making it the most aggressive central bank in Asia.

 

“Another rate cut in December seems likely,” Shilan Shah, of Capital Economics, said before the release of the data.

 

India’s infrastructure output fell in August from a year earlier, the first contraction since April 2015, signalling the recovery in Asia’s third largest economy may be slow despite a cut in the corporate tax rate and other policy measures designed to spur investment.