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Indian economy faces headwinds

The Indian economy is facing a double whammy as the factory output shrank to 0.3% in December after a mild pickup to 1.8% in November, while retail inflation accelerated from 7.35% in December to a 68-month high of 7.59% in January. This comes just after the Finance Minister Smt Nirmala Sitharaman had said the economy had 7 signs of green shoots, including the index of industrial production.  

The chances of IIP improving in the near future remain bleak, as the coronavirus outbreak has taken a toll on international trade. “We expect third-quarter growth to be muted and there could be supply side disruptions for some commodities we import from China due to the coronavirus,” explicates Upasna Bhardwaj, economist at Kotak Mahindra Bank.

Other industry experts are echoing the sentiment. Thus, the statistics office has lowered the FY19 GDP growth rate to 6.1% from the provisional estimate of 6.8% and has forecast 5% growth in FY20. However, the Economic Survey 2020 forecasts a recovery to 6-6.5% in FY21.