Triple threat in store for india
New Delhi: Crucial economic data reflecting the state of the economy on exports, industrial production, inflation and car sales —released on Friday send worrying signals of the continuing slowdown of the Indian economy.
The industrial production in May contracted by 1.6 per cent, which is the lowest in the past 11 months. The manufacturing sector contracted by two per cent in May as against a growth of 2 per cent in April and 2.6 per cent a year-ago. On the export front the data released by the commerce ministry showed that India’s exports contracted by 4.6 per cent in June for the second consecutive month to $23.79 billion.
After falling for three months, retail inflation in June also inched up to 9.87 per cent from 9.31 per cent in the previous month as vegetables became costlier due to floods in parts of country. “These data indicate that the kind of downturn the economy was witnessing, there is no respite from that,” said Sunil K. Sinha, director (economy research), CRISIL.
He said that various measures announced by the government including hiking the FDI had raised hopes that the downturn will get arrested but “unfortunately numbers show that the slide continues.” He said that the data shows that there is virtually no improvement in inflation, with vegetables prices going up, global crude oil prices have also started rising and the rupee is weakening.
“These will have substantial implications go-ing forward. The numbers that are going to follow are not going to be better,” Sinha added.
However, analysts are expecting that in the current fiscal the GDP may shoot up over six per cent due to a low base and good rural income due to a normal monsoon. What will give some respite to the government is the trade deficit was down to three-month low of $ 12.2 billion in June from a massive $ 20.1 billion in May.
Gold and silver imports dipped to $2.45 billion in June from $ 8.4 billion in the previous month. In the last few months the government had ann-ounced a number of steps to curb gold demand in the country.
The government was hopeful that going forward things will im-prove. “The impact of various measures taken in the last six to seven months will be felt in the second half of the year. Therefore, going ahead, I think the situation will improve,” said chairman of the Prime Minister’s Economic Ad-visory Council (PME-AC), C. Rangarajan.
Naina Lal Kidwai, president, FICCI said that the industrial production figures for May are disappointing and emphasised the need for bold reforms which would instill confidence in investors. “There is excess capacity in sectors like auto, cement, metals and textiles. Therefore, government should look at providing demand stimulus measures for sectors witnessing fall in demand,” added Kidwai.
The higher than expected decline in manufacturing reflects overall weakness in production said Dhananjay Sinha of Emkay Global Financial Services.
Post new comment