| NEW DELHI, June 12
NEW DELHI, June 12 Indian economic data on
Thursday is likely to offer some cheer for new Prime Minister
Narendra Modi by showing a pick-up in industrial activity and
Modi has listed fighting inflation, particularly food
inflation, as his topmost priority. He aims to win the battle by
improving supplies of food and clamping down on "hoarders".
Output from mines, utilities and factories is
expected to have expanded 1.9 percent in April from a year
earlier after falling 0.5 percent the previous month, according
to a Reuters poll of economists, because of a recovery in the
infrastructure sector Modi sees as key to a wider revival.
Cooler food prices probably helped ease consumer price
inflation to 8.4 percent in May from a three-month
high of 8.59 percent April, the poll showed.
The statistics ministry is due to release industrial
production and consumer inflation data at 1200 GMT.
Consumer inflation has been averaging nearly 10 percent for
the past two years even though economic growth has been stuck
below five percent, marking the longest slowdown in more than a
quarter of a century.
Promises to break the spell of weak growth and high
inflation helped Modi to a victory last month that gave his
party the strongest parliamentary majority in 30 years.
A slumping industrial performance is at the heart of India's
growth struggle. Output contracted 0.1 percent in the fiscal
year that ended in March. It has eased in four of the past six
Radhika Rao, economist at DBS Bank, said a revival in
manufacturing and investment would have broad multiplier effects
across the economy, but cautioned that an expected shortfall in
monsoon rains could impact both demand and inflation.
"In the short term, the likelihood of a weak southwest
monsoon is an important risk for growth this year and likely an
initial challenge for the new administration," Rao said.
Modi's government is looking to revive the economy through
higher investment in infrastructure, which it hopes will boost
demand in sectors such as cement, steel and power.
He is also aiming to simplify approvals for projects to
kick-start capital investments.
The economic slowdown is taking a toll on public finances.
The federal tax-to-GDP ratio has slipped to 10.2 percent from a
peak of 12.5 percent in 2007/08, leaving the government having
to resort to more rupee bond sales to fund spending commitments.
Higher investment spending without adjustments in wasteful
public expenditure would make it tougher to trim the fiscal
deficit to a targeted 4.1 percent of GDP this fiscal year,
resulting in a heavy bond supply and increased cost of credit
This could worsen India's struggle with persistently high
inflation - on top of the forecasts of below-average monsoon
The poll showed wholesale price inflation rose
to 5.4 percent last month, 0.2 percentage points higher than in
April. The data is due on June 16 at 0300 GMT.
The government has stockpiled staples such as rice, wheat
and sugar from bumper harvests in the last few years but it has
limited means to control jumps in the cost of fruits and
vegetables that have the largest impact on food inflation.
Expectations of an economic turnaround after Modi's victory,
however, have brought in copious capital inflows, sending the
total value of the Indian stock market over $1.5 trillion for
the first time.
Other recent data also gives some hope for a revival.
Merchandise exports posted their fastest growth in
six months in May. The services sector expanded for
the first time in nearly a year last month.
Improving consumer sentiment helped car sales post their
first annual growth in three months in May.
(Reporting by Rajesh Kumar Singh; Editing by Frank Jack Daniel
and Nick Macfie)