Double whammy for economy: Retail inflation hits 15-month high; industrial growth slows

The higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon.

By Ajeet Kumar | Updated: Dec 12, 2017, 18:51 PM IST
Double whammy for economy: Retail inflation hits 15-month high; industrial growth slows

New Delhi: In a double whammy to the economy, industrial output growth slowed down to 2.2 percent in October while retail inflation soared to 4.88 percent in November.

The higher inflation rate is unlikely to push the Reserve Bank of India (RBI) to change its key rate any time soon.

Official data released on Tuesday showed inflation as measured by the consumer price index (CPI) accelerated in November to a 15-month high of 4.88 percent from October’s 3.58 percent, mainly due to costlier fuel, vegetables and eggs.

It was 3.63 percent in November 2016. The previous high was recorded at 5.05 percent in August last year.

As per experts, increased house rent allowances for government employees and rising crude oil prices added to inflationary pressures alongside higher raw material costs due to the Goods and Services Tax (GST) rollout.

At its December 6 policy meeting, the RBI raised its inflation projection by 10 basis points to between 4.3 and 4.7 percent for the six months ending in March. It kept interest rates steady and stressed a neutral policy stance.

The RBI cut rates by 200 basis points from January 2015 until August this year while food and energy prices were down.

Factory output measured in terms of the Index of Industrial Production (IIP) decelerated to 2.2 percent in October compared to 3.8 percent in September due to poor perfomance of consumer durables, manufacturing and mining sectors. The cumulative growth for the period April-October over the corresponding period of the previous year stood at 2.5 percent.

In October, growth in the manufacturing sector, which accounts for 77.63 percent of the index, slowed to 2.5 percent, from 4.8 percent a year earlier. During April- October, manufacturing grew at 2.1 percent, down from 5.9 percent in the same period last fiscal.

Consumer durable goods output contracted by 6.9 percent in October as against a growth of 1.5 percent in the previous year. During April- October, the output of these goods shrinked by 1.9 percent as against a growth of 6 percent last year.

The output of the mining and electricity sectors grew at 0.2 percent and 3.2 percent as compared to 1 percent and 3 percent in October 2016.

Meanwhile, the September IIP number was revised upwards to 4.1 percent from 3.8 percent provisional estimates released last month.