Retail inflation at 15-month high, industrial output growth slows
NEWDELHI: India suffered a macroeconomic setback on Tuesday with retail inflation unexpectedly accelerating to a 15-month high of 4.88% in November and industrial production slowing to 2.2% in October.
Retail inflation, which rose 3.58% in October, quickened the month after mainly on account of rising fuel and food prices. While fuel price inflation accelerated to 7.9%, food price inflation was up 4.4% in November.
Separate data released by the government showed that India’s factory output, measured by the Index of Industrial Production (IIP), slowed in October from an upwardly revised 4.14% in September.
While inflation data revealed the growing downside risk of rising crude oil prices, the deceleration in factory output suggests the turnaround in investment and demand is yet to resume in earnest.
While mining output was stagnant in October, manufacturing and electricity grew at 2.47% and 3.2%, respectively. Capital goods production, which indicates investment demand in the economy, grew for a third consecutive month in October, by 6.8%. However, consumer durable goods contracted for the second consecutive month at 6.9%.
RBI had flagged the upward pressure on inflation including rising fuel prices and the increase in house rent allowance( HR A) to central government employees in its monetary policy review earlier this month, when it kept policy rates unchanged. It had estimated that retail inflation will be around 4.3-4.7% in the third and fourth quarter of 2017-18.
The central bank said that the recent rise in crude oil prices may sustain, especially on account of Organization of the Petroleum Exporting Countries’ decision to maintain production cuts throughnextyear. “Insuchascenario, any adverse supply shock due to geo political developments could push up prices even further,” it added.