NEW DELHI: India’s industrial output grew by a weaker-than-expected two percent in April but the grim data Wednesday was offset by global ratings agency Fitch raising its investment rating outlook to stable from negative.
The two percent year-on-year output growth at the factories, mines and utilities of Asia’s third largest economy undershot market expectations of a 2.4 percent rise and was down from a 3.4 percent jump the previous month.
The production numbers dismayed business, with the Associated Chambers of Commerce and Industry of India branding them “pathetic”.
But in a rare piece of good news for Prime Minister Manmohan Singh’s beleaguered Congress government, battling charges of economic mismanagement and corruption, Fitch revised India’s sovereign rating to stable from negative.
The revision “reflects the measures taken by the government to contain the budget deficit”, Fitch said in a late afternoon statement.
The move was a reversal of the negative investment outlook Fitch assigned to India in June 2012 and came after rival rating agency Standard and Poor’s upheld its negative outlook last month.
Fitch noted the government trimmed the fiscal deficit to 4.9 percent of gross domestic product in the last financial year to March 2013 from 5.7 percent the previous year.
It said the revision also was a recognition of “albeit limited” progress in tackling hurdles to growth, such as delays in government approvals of projects to upgrade dilapidated highways and other infrastructure.
Fitch’s announcement, which came after the stock market closed, could boost investor confidence and give a lift to India’s currency, which clawed its way higher from a lifetime low of 58.98 rupees to the dollar that it hit Tuesday.
“I believe the Fitch announcement will improve investor sentiment and it has come at a most opportune time with the drop in the rupee,” Ajay Bodke, investment strategy head at Mumbai investment house Prabhudas Lilladher, said.
The rupee, which has been weighed down by India’s weak public finances and speculation that the United States may roll back monetary stimulus, was trading at 57.79 to the dollar in late trade Wednesday .
Planning Commission deputy chairman Montek Singh Ahluwalia told reporters that a slew of government economy-opening steps initiated last September to spur growth and improve domestic investment confidence should result in a more “stable” rupee.
AFP
