New Indian Government Will Inherit Slow Output and High Inflation

India’s ailing economy showed little sign of improvement on Monday, trapped in a spell of weak growth and high inflation when the country is on the cusp of political change that is widely expected to script an economic revival.

Output from mines, utilities and factories fell for a second straight month in March, shrinking 0.5 percent from a year earlier compared with analysts’ median forecast of an annual contraction of 1.5 percent, government data showed on Monday. Output had fallen a revised 1.8 percent in February.

In other data, consumer inflation accelerated to a three-month high of 8.59 percent in April from 8.31 percent in March.

Asia’s third-largest economy is battling the worst slowdown since the 1980s as GDP growth has almost halved to under 5 percent in the past two years. The slowdown, however, has not cooled inflation that has been averaging nearly 10 percent for the past two years, way above the central bank’s comfort zone.

Monday’s data will likely put Reserve Bank of India (RBI) chief Raghuram Rajan into a quandary ahead of a policy meeting on June 3. Higher inflation readings make it tougher for him to support a flagging economy.

via Reuters

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