India's industrial output, exports decline as economy falters
![The signs are that India's economy is struggling](https://static.independent.co.uk/s3fs-public/thumbnails/image/2012/11/13/09/india.jpg)
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Andrew Feinberg
White House Correspondent
Indian industrial production unexpectedly fell in September and the trade deficit widened to a record last month as exports declined, adding to signs that Asia's third-largest economy is struggling.
Output at factories, utilities and mines dropped 0.4 percent from a year earlier after a revised 2.3 percent gain in August, the Central Statistical Office said in a statement in New Delhi Monday. The median of 28 estimates in a Bloomberg News survey was for a 2.8 percent increase. The trade deficit was $20.96 billion in October, the Commerce Ministry said in a separate report.
Factory production has been subdued for most of this year, hurt by moderating consumer demand and a drop in exports as the global recovery falters. The Reserve Bank of India has signaled it may lower interest rates in the first quarter of 2013 to aid growth as inflation cools, after resisting calls from the Finance Ministry for a cut last month.
"There is some amount of weakness in demand," said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. in Mumbai. Still, "it's not as if it has fallen off a cliff," he said.
Prime Minister Manmohan Singh's administration began a policy overhaul on Sept. 13, unveiling curbs to fuel subsidies to restrain spending and the next day allowing more investment from abroad in industries such as retail and aviation. Officials have also lowered a levy on overseas borrowing to spur capital inflows and aid the currency.
The government is trying to avert a credit-rating downgrade to junk status and bolster an economy that the International Monetary Fund predicts will expand 4.9 percent in 2012, the least in a decade.
Manufacturing dropped 1.5 percent in September from a year earlier, while capital goods output decreased 12.2 percent, Monday's data showed. Mining rose 5.5 percent and electricity output increased 3.9 percent.
India's exports merchandise shipments fell 1.6 percent in October from a year earlier to $23.3 billion in October, while imports climbed 7.4 percent to $44.2 billion, according to the Commerce Ministry.
A rise in oil and gold imports contributed to the widening trade gap, Commerce Secretary S.R. Rao said Monday. Inbound oil shipments surged 31.6 percent to $14.8 billion. The trade ministry will review measures to boost exports, Rao said.
India faces elevated inflation, preventing the central bank from joining nations such as Brazil and Thailand in extending interest-rate cuts as the world economy struggles.
Consumer prices rose 9.75 percent in October from a year earlier, after a previously reported 9.73 percent gain in September, a report showed Monday.
The benchmark wholesale-price index probably rose 7.9 percent in October from a year earlier, according to the median estimate in a Bloomberg News survey of 28 economists ahead of a release on Nov. 14.
The Indian economy will turn around in the second half, even as inflation could stay high until December, Chakravarthy Rangarajan, chairman of Singh's Economic Advisory Council, said on the ET Now television channel.
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