Economic growth in Asia's third largest economy has almost halved to below 5 percent in the past two years on weak investments and consumer demand, in the worst slowdown for the south Asian nation since the 1980s.
Friday's government data, which measures production at mines, utilities and factories, confirmed the dire strait the economy is in.
A continuing slump in capital and consumer goods sectors resulted in a surprise 1.9 percent annual contraction in industrial production in February, which compares with analysts' median forecast of 0.9 percent growth.
Manufacturing fell 3.7 percent year-on-year in February. Industrial output has fallen in four of the last five months.
Both consumer demand and investment conditions seem to be weakening, thereby further dampening the outlook for manufacturing.Revival of manufacturing growth requires some bold reforms in the area of the business regulatory environment which should be the focus and priority for the (new) government.
In other data on Friday, merchandise exports fell for a second straight month in March, widening the trade deficit to a five-month high.
The trade gap in March widened to $10.51 billion, its highest since October 2013, data from the Ministry of Commerce and Industry showed on Friday. Overseas sales of Indian goods fell 3.15 percent from a year earlier to $29.58 billion in March.Exports for the 2013/14 fiscal year, however, grew 3.98 percent on year to $312.36 billion. Together with an 8.11 percent decline in annual imports, that helped sharply narrow the country's full-year trade shortfall to $138.59 billion from $190.34 billion a year ago.
Ratings agency Fitch, which affirmed India's sovereign credit ratings at 'BBB-' with a stable outlook on Friday, reckons its economic fortunes will remain uncertain until the elections are over."A policy push that includes structural and governance reforms, fiscal consolidation and efforts to rein in inflationary pressures would likely require a coherent coalition with a strong electoral mandate," it said in a note.
Investment malaise lies at the heart of India's prolonged economic slowdown. Capital investment contributes nearly 35 percent to the economy, but it barely grew in the fiscal year that ended in March as delays in clearances and funding issues grounded many infrastructure projects.
Although a cabinet task force set up by Prime Minister Manmohan Singh has fast-tracked approvals for projects worth 6 percent of gross domestic product, results are not yet visible.
Capital goods output, a proxy for capital investment, shrank for a third straight month in February, falling by an annual 17.4 percent.