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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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza