Production at factories, mines and utilities shrunk for the second straight month in November, by 2.1 percent, data from the Statistics Ministry showed, dragged down by a contraction in consumer goods output.

Analysts polled by a news agency had predicted output to grow 1.0 percent.

Meanwhile, the trade deficit widened to USD 10.14 billion last month from USD 9.22 billion in November on waning exports growth, data from the Trade Ministry showed on Friday.

Merchandise exports rose 3.49 percent year-on-year to USD 26.35 billion, slowing down from a 5.86 percent pace in November.

The second successive fall in the output and slowing exports growth will likely dampen hopes for a rebound in Asia's third-largest economy that is struggling to come out of a situation that some analysts define as stagflationary.

For the past four quarters, economic growth has been stuck below five percent while prices are rising.

The ruling Congress party is desperately seeking a rebound to help win back voters in the election expected between April and May. The opposition’s prime ministerial candidate, Narendra Modi, has made the depressed economy a central plank of his campaign.

Strong exports along with a robust farm output were expected to usher in an economic revival, beginning in the October-December quarter.

The latest data may make investors more wary of committing fresh investments in an economy that recorded nine percent annual expansion until two years back and was widely expected to be one of the main drivers of the global economic recovery.

Looming elections as well as lingering uncertainty over the future course of US Federal Reserve's monetary policy, which has flooded emerging markets including India with cheap money, have already turned many investors cautious.

The latest industrial data shows no departure from a torrid narrative of weak investments and flagging consumer demand.

The production of consumer goods, a proxy for consumer demand, fell an annual 8.7 percent in November. The sector has grown just once in the last seven months.

Capital goods production, a barometer for investments in the economy, grew just 0.3 percent in November from a year earlier.

What experts say?

According to economists, weak festive demand and sluggish investment activity led to a slump in factory production in November.
Aditi Nayar, senior Economist at ICRA: Weak festive season demand for consumer durables, moderation in growth of merchandise exports in dollar terms, continuing issues for sugar and gems and jewellery and sluggish investment activity contributed to the weak industrial performance in November 2013. The contraction in industrial production in October-November 2013 is worrying, highlighting that the boost to domestic demand following the kharif harvest is weaker than anticipated.

Sunil Kumar Sinha, India Ratings Director (Public Finance): What is more disappointing is that it (IIP data) is so lacklustre despite a favourable base effect (November 2012: -1 percent) and festival demand.

Rajiv Biswas, Asia-Pacific chief economist at IHS:
The November industrial production figures continue to show that the Indian industrial sector remains in recession, with clear evidence that domestic consumption remains weak.

Rana Kapoor, Assocham President: The red marks on IIP are a matter of serious concern underscoring the need for immediate policy intervention by the RBI and the government. The RBI should cut interest rates while the government should take steps to boost demand in the public sector.
Chandrajit Banerjee, CII Director General: Much more needs to be done to revive investment. The government should ensure that projects getting cleared by the Cabinet Committee on Investment (CCI) are implemented on the ground. Government policies should be complemented with a shift towards an accommodative policy announcement by the RBI in its forthcoming monetary policy to revive investment and propel demand.
Sharad Jaipuria, PHD Chamber of Commerce President:
The most worrying factor is significant slowdown in the manufacturing sector. The signs of slowdown in the consumer goods segment are also appearing.


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