NEW DELHI (Reuters) -India's industrial output unexpectedly fell year-on-year in August for the first time in 18 months, as heavy rains dampened mining and construction activity while a drop in manufacturing indicated a broader slowdown.
India's industrial output fell 0.8% from August 2021, compared with Reuters poll of a rise of 1.7% and rise of 2.4% in July.
"In an unpleasant surprise, the IIP (industrial output) contracted in August 2022, with heavy rains dampening construction activity and electricity demand," Aditi Nayar, economist at ICRA said.
Mining output fell 3.9%, while manufacturing activity fell 0.7%.
India's central bank, which has been tightening its policy aggressively to tame inflation that hit a five-month high in September, may have to walk a tight rope if activity does not improve in the coming months.
"The lower than expected IIP growth corroborates the narrative of a volume based slowdown, indicating stress in lower income households," said Saugata Bhattacharya, economist at Axis Bank.
Bhattacharya added the India's economy may slow more than currently expected given a drop in exports. Exports fell more than 3% in September according to a government data released earlier this month.
Many economists have trimmed their Indian growth forecasts for the current fiscal year in the past weeks.