Indian industrial output takes nose dive

In the latest weak figures for Asias third-largest economy blamed on a string of interest rate rises.The countrys 1.9 percent industrial expansion in September undershot market forecasts of a 3.5 percent jump and added to a gloomy picture of an economy that has lost traction due to 13 interest rate hikes since March 2010.Theres a clear slowdown, definitely monetary policy is biting, D.K. Joshi, chief economist at leading Indian credit rating agency Crisil, told AFP.The flagging output figures, the weakest data since September 2009, also undercut hopes that emerging markets such as India can power global growth as Europe and the United States struggle.Earlier this week, neighbouring China reported industrial output rose 13.2 percent year-on-year in the first 10 months of 2011, slower than the 14.2 percent growth recorded in the first nine months of the year.Indias manufacturing production rose 2.1 percent in September, but output of capital goods such as factory equipment -- a key pointer to future activity -- as well as consumer goods and mines all shrank.The weak figures buttressed expectations that Indias hawkish central bank would pause in hiking rates to combat inflation even though it remains stubbornly high at nearly 10 percent, analysts said.The bank signalled that last months quarter-point rate rise could be the last for 2011 and that worries about growth would assume greater prominence.The Reserve Bank of Indias anti-inflation battle has been one of the most aggressive globally, but has had little obvious impact.On Friday, food inflation fell nearly half a percentage point from the previous week but still stood at a hefty 11.81 percent for the week.Overall inflation, measured monthly, stands at 9.72 percent with some analysts expecting a slight rise when figures are released next week.Even with high inflation, with the global economic scenario also deteriorating, the central bank should not only pause but begin to reverse its interest hikes, said Chandrajit Banerjee, director general of the Confederation of Indian Industry, which lobbies on behalf of companies. He warned about the impact of rate rises on investment and demand.The Reserve Bank has revised its estimates for economic growth for this financial year to March 2012 to 7.6 percent, down from an earlier 8.0 percent, saying the economy is clearly seeing slowing growth.But many economists estimate growth could be seven percent or even lower.The string of rate rises has weakened consumer demand during the ongoing festive season across a range of sectors, from cars to property, as loans become costlier while inflation erodes incomes.The latest figures cap a string of data showing the economy losing ground. Car sales in October fell nearly 24 percent, the most in close to 11 years, while Octobers annual export growth was the slowest in two years.The weakening economy has put pressure on federal finances with doubts mounting about the governments ability to meet its goal of containing the fiscal deficit to 4.6 percent of gross domestic product as tax revenues fall.The central bank made it clear reducing inflation was its top priority and if growth had to moderate that was the price, Brian Jackson, senior emerging markets strategist at Royal Bank of Canada in Hong Kong, told AFP. Now, in general, a slowdown is going on, he said.