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Aug 08, 2013, 09.04 AM IST | Source: Reuters

India's June factory output seen contracting for 2nd month

Weaker factory output will add to the Reserve Bank of India's challenge of reviving a moribund economy, growing at its weakest pace in a decade, as well as a plunging rupee that is hitting new record lows almost daily.

India's June factory output seen contracting for 2nd month

Indian factory production in June probably fell for a second straight month, hurt by waning investor confidence and tepid demand, a Reuters poll showed, reflecting further weakness in the economy.

Production at factories, mines and utilities was estimated to have fallen 1.2 percent on a year ago, after shrinking 1.6 percent in May, according to the median consensus of 20 economists. Forecasts ranged from a rise of 0.5 percent to a fall of 2.7 percent.

Weaker factory output will add to the Reserve Bank of India's challenge of reviving a moribund economy, growing at its weakest pace in a decade, as well as a plunging rupee that is hitting new record lows almost daily.

"Industrial growth is likely to have stayed sluggish in June, with both the investment demand - as measured by growth in capital goods and consumer durables output - and consumption demand staying weak," said Abhishek Upadhyay, an economist at Axis bank.

Consumer goods production in May fell 4 percent on a year ago, while capital goods output, a barometer of investment, shrank 2.7 percent.

Output growth in the eight key infrastructure industries - which make up almost 40 percent of factory production - slowed to 0.1 percent in June from 2.3 percent in May.

Private surveys of purchasing managers have suggested sluggish business in Indian factories over the past few months.

"Several of the lead indicators that are available point to weakness," said Aditi Nayar, an economist at ICRA.

The HSBC Manufacturing PMI survey showed activity in Indian industries barely grew for the past three months.

Weak global demand has also hurt Indian manufacturers as annual exports in June fell for the second consecutive month.

Exports are falling despite the rupee being the worst-performing Asian currency this year. It hit an all-time low of 61.80 per dollar on Tuesday, down 11 percent from the start of the year.

READ MORE ON  RBI, factory production, rupee, CAD

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