Growth fall jolts Indian economy

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India's industrial growth has shrunk for the first time in more than a decade as the country witnesses the fallout of the global credit crunch.

Factory output contracted by 0.4% in October compared with a rise of 12.2% in the same month last year and a 5.45% increase in September.

Some experts say the immediate future for the industrial sector is bleak.

India plans a second economic stimulus, after announcing $4bn in extra spending and interest rate cuts recently.

Experts said the fall in factory output in October was worrisome.

Car sales, for example, posted their biggest yearly fall in eight years, dropping by nearly 20%. Sales of commercial vehicles were down by nearly 50%.

Many car companies have cut production and slashed prices in view of the declining demand.

'Wake up call'

"It is a shocking figure and only underlines the fact that the Indian economy is in a very bad situation," TK Bhaumik, economist at JK Industries Group, told Reuters news agency.

"This is a wake up call for the government."

He said the government should consider an additional economic stimulus and that banks should ease interest rates to lift consumer demand.

Economist Robert Prior-Wandesforde told the AFP news agency that the outlook for the Indian economy was bleak.

"The industrial sector and indeed the economy as a whole has been softening for some time and the situation is deteriorating more rapidly now," he said.

Mr Prior-Wandesforde said the negative growth reflected a "a combination of factors including the developed world recession, the lagged effects of previous rate rises in India and the emergence of a credit crunch in the country".

Separately, the federal commerce minister said that the government was planning to announce a second round of economic stimulus policies next week to boost growth.

"We have to ensure our domestic demand continues and the government will be taking all steps to push the country back on to a 9-10% growth track," Kamal Nath told reporters.

"We're again looking at something [a package] for next week," he said.

He said the "package" would aim to create jobs in some sectors and provide easier access to credit.

Companies welcomed the first economic stimulus last weekend but said it did not compare to China's $586bn stimulus package announced in November.