Shrinking factory output, surging prices signal challenges for new government: Experts

Shrinking factory output, surging prices signal challenges for new government
Economy experts reckon that the work of the new government, which will take charge in a few days time, will be cut out as shrinking factory production and accelerating inflationary pressures signal the challenges posed by Asia's third biggest economy, which has grown below the 5 per cent mark for the past few quarters.

India's industrial output shrank for the second month on the trot, contracting by 0.5 per cent, year on year in March 2014, a sign that an end to the slowdown in the economy is some time away.

Meanwhile, retail inflation accelerated to the fastest pace in three months to 8.59 per cent in April 2014 as food prices continued to rise skywards, pinching the common man, and raising bets of further monetary tightening by the Reserve Bank of India (RBI) next month. In March 2014, the retail inflation index rose by 8.31 per cent over the same month a year ago. The RBI is aiming to keep inflation at 8 per cent by January 2015.

A stable, reform and investor friendly government may help revive business sentiment and spur investment, bolstering the outlook for economic growth.

The new government should send out a strong message over its commitment to reviving the economy and accelerate infrastructure and manufacturing projects, experts say.

Read more about: inflation, economy
Story first published: Tuesday, May 13, 2014, 12:50 [IST]
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