NEW DELHI (Reuters) -India’s industrial output unexpectedly fell year-on-year in August for the first time in 18 months, as heavy rains dampened mining and construction activity while a drop in manufacturing indicated a broader slowdown.
India’s industrial output fell 0.8% from August 2021, compared with Reuters poll of a rise of 1.7% and rise of 2.4% in July.
“In an unpleasant surprise, the IIP (industrial output) contracted in August 2022, with heavy rains dampening construction activity and electricity demand,” Aditi Nayar, economist at ICRA said.
Mining output fell 3.9%, while manufacturing activity fell 0.7%.
India’s central bank, which has been tightening its policy aggressively to tame inflation that hit a five-month high in September, may have to walk a tight rope if activity does not improve in the coming months.
“The lower than expected IIP growth corroborates the narrative of a volume based slowdown, indicating stress in lower income households,” said Saugata Bhattacharya, economist at Axis Bank.
Bhattacharya added the India’s economy may slow more than currently expected given a drop in exports. Exports fell more than 3% in September according to a government data released earlier this month.
Many economists have trimmed their Indian growth forecasts for the current fiscal year in the past weeks.
(Reporting by Aftab Ahmed, Manoj Kumar and Chris Thomas in Bengaluru; Editing by Andrew Heavens and Tomasz Janowski)
