India's factory output shrank 0.4 percent in Septemer compared with a year earlier, frustrating hopes for an increase of 2 percent or more, while the trade deficit rose to $21 billion in October from $18 billion a month earlier, according to the Wall Street Journal and Financial Times.
The bad news came as an unpleasant surprise for Diwali, as Indians had been expecting to see signs of an economic recovery--especially given Prime Minister Manmohan Singh's recent success in pushing through several economic reforms.
The government also revised its previous industrial output figures for August, lowering the number to a 2.3% expansion from 2.7% reported earlier, the WSJ said.
The stock market dipped and the bond market increased on the news, which suggests that India's GDP growth figures may be lower still this year.
Saugata Bhattacharya, chief economist at Axis Bank, told the Journal that the contraction reinforces the fact that demand in the economy remains extremely weak. He also said that he drop in the output of capital goods and consumer goods was particularly sharp, the WSJ reported
C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council, told the paper that the economy may grow as little as 5.5%-6.0% this fiscal year--a substantial drop from last year's 6.5%, which was India's slowest GDP growth in nine years.