India's June Industrial Output Falls 1.8 Percent

ERIKA KINETZ

MUMBAI, India (AP) ⿿ India's industrial output fell a worse-than-expected 1.8 percent in June, its third fall in four months, as slumping manufacturing and investment darken the outlook for Asia's third-largest economy.

India's growth is at its lowest in almost a decade and economists are gradually reaching the conclusion that things are worse than they thought. The central bank recently cut its growth forecast for the year ending March 2013 to 6.5 percent, and many private sector economists are saying that the economy won't even attain 6 percent growth.

Confidence has been decimated by New Delhi's failure to unblock bottlenecks in crucial sectors like land, power and food, even as it pours money into fertilizer and fuel subsidies, widening the fiscal deficit.

Now nature is adding to India's woes, with the country expected to at least 10 percent less rain this year than normal during the June-to-September monsoon. That is a devastating blow for the hundreds of millions of Indians who work the land, most of which is not irrigated despite decades of government effort to drought-proof Indian farms. The shortfall is also expected to worsen food inflation and drive down rural demand.

Power outages that affected over 600 million people last week showcased the cost of weak governance. Policy flip-flops and shifting tax laws have also spooked investors, both at home and abroad. The central bank is locked in a game of nerves with New Delhi, having twice declined to cut rates to give the economy a kick, saying that monetary policy can't replace substantive policy reform.

Thursday brought another slew of bad news. It emerged that India's top carmaker, Tata Motors, is thriving only because it is able to sell lots of British luxury cars in China. The state-run Indian Oil Corporation topped this quarter's losers, posting a $4.1 billion quarterly loss Thursday because the government failed to compensate it for selling fuel below cost as it struggled to buy crude with a falling Indian rupee.

1 2 Next › Last »