The Indian rupee is trading sideways against its US counterpart on Tuesday as inflation eased and industrial data expanded worse than economists’ forecasts. Despite bullish forecasts at the start of 2021, the rupee has performed below expectations, driven by disappointing economic numbers and immense coronavirus infections. Can the rupee pare its losses to close the year?

According to the Ministry of Statistics and Programme Implementation (MOSPI), the annualized inflation rate surged 4.35% in September, down from the 5.3% gain in August. The market had penciled in an inflation read of 4.5%.

This represented the fourth consecutive monthly drop in inflation readings and the lowest it has been since April.

India’s industrial and manufacturing sectors did not perform as many had anticipated. Industrial output climbed 11.9% year-over-year in August, below the median estimate of 12%. Manufacturing production advanced, down from 10.5% in the previous month.

Both measurements have eased significantly since the spike this past spring.

That said, some international organizations remain bullish on India’s economy, According to the World Bank, the emerging market’s gross domestic product (GDP) forecast for 2021-2022 is slated to grow 8.3%, buoyed by an increase in public investment to enhance manufacturing.

Although one of Asia’s largest economies is expected to expand, the World Bank’s estimate is lower than the previous report of 10.1%.

But government officials are optimistic that India can enjoy a swift recovery.

“India is well-placed on the path to swift recovery with growth impulses visibly transmitted to all sectors of the economy… Strategic reforms undertaken so far along with new milestones in vaccination drive have enabled the economy to navigate the ravaging waves of the COVID-19 pandemic,” the Finance Ministry’s Monthly Economic Review stated.

India continues to witness approximately 14,000 new coronavirus infections per day. However, this is way down from the peak of around 400,000 in April.

The USD/INR currency pair rose 0.17% to 75.53, from an opening of 75.50, at 12:19 GMT on Tuesday. The EUR/INR jumped 0.2% to 87.28, from an opening of 87.11.