(MENAFN- Khaleej Times) India's industrial output contracted unexpectedly in May, adding pressure for more government steps to revive the economy as a sliding rupee curbs scope for further interest-rate cuts.
Production at factories, utilities and mines declined 1.6 per cent from a year earlier after a revised 1.9 per cent climb in April, the Central Statistical Office said in New Delhi on Friday. The median of 31 estimates in a Bloomberg News survey was for a 1.4 per cent gain. Another report showed consumer-price inflation accelerated to 9.87 per cent in June.
The rupee's plunge to a record low against the dollar this year threatens to stoke inflation and prompted the Reserve Bank of India to leave borrowing costs unchanged last month, snapping a run of three reductions. The government has eased foreign- investment limits in industries such as aviation and retail, seeking to steady the currency and spark an economic revival. "The industrial-production data is bad and it's a surprise that it's a negative, while consumer price inflation remains high," said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai. "There is an immediate need to release food stocks to cool down food prices."
The rupee strengthened 0.1 per cent to 59.63 per dollar at the close in Mumbai, while the S&P BSE Sensex index advanced 1.4 per cent. The yield on the 8.15 per cent note due June 2022 rose to 7.65 per cent from 7.57 per cent on Thursday.
The rupee touched an all-time low of 61.2125 on July 8.
India's record current-account deficit and the possibility of reduced US monetary stimulus have hurt the currency.
The nation is considering selling sovereign bonds abroad for the first time as policy makers weigh measures to help stem rupee declines, two officials with direct knowledge of the matter said.
The trade deficit narrowed to $12.2 billion in June from $20.1 billion the previous month as gold and silver imports slid, a separate government release and previously reported data showed on Friday. India has raised import taxes on the yellow metal twice in 2013.
The Reserve Bank left borrowing costs at 7.25 per cent in June, after 25 basis-point cuts in January, March and May each. Asia's third-largest economy expanded 5 per cent last fiscal year, the slowest pace in a decade.
Consumer-price inflation in June quickened from 9.31 per cent in May and remained the second-fastest in the Group of 20 major economies.
Wholesale-price inflation probably accelerated to 4.94 per cent in June from 4.7 per cent in May, according to the median estimate in another Bloomberg survey.
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