Industrial output shrinks 2.1%, trade gap widens

Latest data can spook investors

Industrial output shrinks 2.1%, trade gap widens

India's economic woes worsened on Friday 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 percent, data from the Statistics Ministry showed, dragged down by a contraction in consumer goods output.

"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 on Friday.Merchandise exports rose 3.49 per cent year-on-year to $26.35 billion, slowing down from a 5.86 percent 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.

The ruling Congress party is desperately seeking a rebound to help win back voters in the election expected between April and May. Opposition prime ministerial candidate Narendra Modi has made the depressed economy a central plank of his campaign.

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 percent annual expansion until two years back and was widely expected to be one of the main drivers of the global economic recovery.

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