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Double whammy for govt: Inflation up at 11.24%, IIP contracts by 1.8%

The RBI, scheduled to review the monetary policy on December 18, hiked the key lending rate by 0.25 percent in each of it previous two policy reviews to contain inflation.

New Delhi: In a double whammy for the government, retail inflation soared to a nine-month high of 11.24 percent and factory output shrank 1.8 percent, developments that may prompt the Reserve Bank to further increase a key interest rate next week.

Official data released on Thursday showed inflation as measured by the consumer price index (CPI) crossing the 11 percent mark in November on account of costlier vegetables and fruits such as onions and tomatoes.

The Index of Industrial Production (IIP) contracted in October after three months, mainly due to poor performances in manufacturing, mining and consumer durables.

Commenting on inflation, RBI Governor Raghuram Rajan said, "I think monetary policy also has a role to play in trying to balance demand and supply. Again, as I said, we are aware of the weak economy but we also have to take into account inflationary pressure."

The RBI, scheduled to review the monetary policy on December 18, hiked the key lending rate by 0.25 percent in each of it previous two policy reviews to contain inflation.

Before the data was released, the rupee closed 58 paise lower at 61.83 against the dollar while the 30-share benchmark Sensex plunged 246 points to close below the 21,000 level.

Persistently high inflation was touted as one of the main reasons for the defeat of the Congress party in the recently concluded assembly elections in the key states of Delhi, Madhya Pradesh, Chhattisgarh and Rajasthan.

In November, vegetable prices rose 61.6 percent from a year earlier, compared with a 45.67 percent increase in October. Fruits were 15 percent costlier.

The CPI data showed pulses were dearer by 1.2 percent, cereal prices by 12.07 percent and milk products by 9.06 percent last month.

Prices of protein-rich items such as eggs, meat and fish rose 11.96 percent.

Inflation in the food and beverages segment was 14.72 percent in November compared with 12.56 percent in the previous month.

Inflation remained in double digits for several months until March and declined to 9.39 percent in April before rising to 10.17 percent in October.

Data on inflation based on the wholesale price index is scheduled to be released on Monday.

Industrial output for April-October was unchanged compared with 1.2 percent growth in the same period of 2012-13.

The manufacturing sector, which constitutes over 75 percent of the IIP, declined 2 percent in October as against growth of 9.9 percent a year earlier. During April-October, the sector's output contracted 0.3 percent compared with growth of 1.1 percent in same period last year.

The mining sector, with a weight of about 14 percent in the index, contracted 3.5 percent in October as against a dip of 0.2 percent a year earlier. In April-October, mining production shrank 2.7 percent as against a contraction of 1 percent.

Power generation growth was 1.3 percent in October compared with a 5.5 percent expansion a year ago. Power generation increased 5.3 percent in April-October compared with 4.7 percent in the same period last year.

Ten of the 22 industry groups in the manufacturing sector showed negative growth in October.

From Zee News

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