Home / Opinion / Quick Edit /  Opinion | IIP: A turn for the worse

There’s more bad news for India’s economy. Industrial output in September fell 4.3% from a year earlier, pushed down by a broad-based decline in mining, manufacturing and electricity. The reading is worse than the 1.4% decline in August. Clearly, the economy hasn’t yet hit rock-bottom. Rather, it may be getting worse.

A big concern is the 20.7% fall in capital goods output. This suggests that the investment mood remains downbeat despite the government’s measures aimed at making India’s business environment more attractive. Corporate tax rates, for example, were slashed. So far, though, this has had no noticeable effect. One could argue that such steps need more time to show results. Yet, anxieties over the economy are growing. Letting the situation worsen could make a recovery harder to execute. Since the government has little fiscal space, the Reserve Bank of India (RBI) would have to do its bit to boost growth. Another rate cut next month could be on the cards if inflation for October turns out to be benign i.e. within close range of RBI’s 4% aim. But the push that’s needed may have to go beyond the usual fiscal and monetary levers.

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