oops Fears of E.U.Crash.. Indian industrial production drops 5.1%

oops Fears of E.U.Crash..

Indian industrial production drops 5.1%

India’s industrial output has fallen for the first time in more than two years, sending the rupee to an all-time low and highlighting the vulnerability ofemerging market s to the eurozone debt crisis.

Industrial production dropped 5.1 per cent in October from a year earlier, official data showed on Monday, bolstering the case for monetary easing in Asia’s third-largest economy.

More

ON THIS STORY

• Singh faces anti-graft fight after retail loss
• Editorial Reforming India
• Shelving reform delivers blow to Singh
• Barclays quits $1bn retail business in India
• Analysis How to open up India’s economy

ON THIS TOPIC

• Slowing domestic demand hits rupee
• Rupee’s fall sparks calls for action
• Indian rupee hits record low against dollar
• India raises rates amid growth warnings

IN INDIA

• Indian diabetics spur need for eye surgery
• India shelves plan for retail reform
• India and China cancel border talks
• India opens doors to foreign retailers

“The data are way worse than we were expecting,” said A Prasanna, economist at ICICI securities in Mumbai. “Usually output is lower during the months of October and November as there are fewer working days due to the festival season but a 5.1 per cent drop is significantly more than we predicted.”

Manufacturing output, which accounts for about three-quarters of industrial production, dropped 6 per cent in October. Capital goods production, considered a barometer of investment sentiment in the country, fell 25.5 per cent.

The Indian rupee hit an all-time low against the dollar on the news, crossing the Rs52.80 mark. The Bombay Stock Exchange benchmark Sensex index closed down 2.1 per cent at 15,870.

Criticism is mounting over the ruling Congress party’s economic management over the past three years. The government’s credibility took a hit last week after it shelved plans to open the $450bn retail sector to foreign foreign investment – a flagship reform intended to re-energise the economy.

Analysts said the sharp fall in output will add to the pressure on the Reserve Bank of India to ease monetary policy at its next meeting on December 16 and also shift its stance from combating record high inflation to stimulating waning economic growth.