India's industrial output grew at its weakest pace in 20 months in December, expanding just 1.6 percent from a year earlier, data Friday showed, stoking concern that the economy is cooling.
The slower-than-expected growth comes after seven interest rate hikes in less than 12 months to tame inflation - the most aggressive monetary tightening in Asia - prompted manufacturers to scale back production.
The output by mines, factories and utilities was "disappointing," said Finance Minister Pranab Mukherjee. But "monthly and weekly figures do not reflect the correct picture," Mukherjee told reporters. "We shall have to take the whole year into account. Let us see how it reflects in the final picture."
India's weak output performance contrasted with neighbouring China's industrial production, which grew by 13.3 percent in the 2010 fourth quarter.
India's December output growth compared to an 18 percent rise in the same month a year earlier. Analysts had forecast growth of two percent.
Manufacturing output, which accounts for 80 percent of the industrial index, rose a scant 1.0 percent in December, down from nearly 20 percent a year earlier. Production of capital goods such as construction, factory and other equipment shrank by 14 percent on year after expanding by 44 percent a year earlier. Business groups said they feared the economy was losing traction. The government revised upwards November's industrial production to 3.62 percent from a previous figure of 2.7 percent.
The low December figure can partly be blamed on the high base figure of a year ago when the economy was emerging from the global financial crisis, but still marks a significant gearing down of momentum from earlier months.
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