India’s Oct IIP drops to negative 0.4% from year ago

India’s industrial production fell for the first time in 15 years. Output at factories, utilities and mines dropped 0.4% in October from a year earlier after a revised 5.45% gain in September, according to the Central Statistical Organization. Market was expecting an increase of 2.1%. IIP last declined in output in April 1993.

Waning exports and weaker domestic demand are forcing companies such as Mahindra & Mahindra Ltd. and Ashok Leyland Ltd. to cut production, weakening growth in an economy expected by the central bank to expand at the slowest pace in more than four years.

India’s exports fell for the first time in seven years in October.

Earlier, on Dec. 6, RBI lowered its repurchase rate to 6.5% from 7.5%, the third cut since October. The next day the government announced a US$4bn stimulus package.

Manufacturing, which accounts for about 80% of total output, dropped 1.2% in October. Electricity output rose 4.4% and consumer-goods production fell 2.3%.

Passenger-car sales declined 19% last month, the most in more than five years, as tighter lending by banks and a slowing economy hurt demand. Sales fell to 83,059 from 103,031 a year earlier, according to the Society of Indian Automobile Manufacturers.

Concern over companies cutting production and losing profits has seen Sensex decline 52% this year. FIIs have sold US$13bn of domestic equities this year, compared with US$17.2bn of share purchases in 2007.

Weaker production and exports may hurt India’s economic expansion. India's economy may grow 7.5% in the year to March 31 from 9% or more annually in the previous three years, according to the RBI data.