A persistent decline in industrial production and a surge in inflation will pose big challenges for the new government, which is expected to assume office later this month.
While industrial production shrank for the second month in a row, contracting 0.5 per cent in March, retail inflation surged to a three-month high of 8.59 per cent in April, according to data from the Central Statistics Office (CSO). The IIP showed growth of 3.5 per cent in March 2013.
The weak industry scenario should propel the new government to send out strong signals of its commitment to spur growth, the Confederation of Indian Industry (CII) said.
The nine-phase Lok Sabha elections ended today and votes will be counted on Friday. The new government, which exit polls project is likely to be headed by Narendra Modi, will have a tough task to bring the economy back on track.
"Top priority should be given to reviving investor sentiment by ensuring that cleared projects in the manufacturing and infrastructure sector take off on the ground, getting large projects like DMIC (Delhi-Mumbai Industrial Corridor) into implementation mode and bringing clarity in tax policy," said CII Director General Chandrajit Banerjee.
Output as measured by the index of industrial production (IIP) remained almost flat in 2013-14, declining 0.1 per cent compared with an expansion of 1.1 per cent in 2012-13, mainly on account of a drop in output in manufacturing, especially capital goods.
The data showed costlier vegetables, fruits and milk pushed up retail prices by 8.59 per cent in April, the most in three months.
Rising inflation may prevent the Reserve Bank of India from easing interest rates in its monetary policy review on June 3.
Retail inflation, measured by the consumer price index (CPI), was 8.31 per cent in March.
