Home ECONOMY Retail inflation in double-digit; IIP contracts by 1.8 %

Retail inflation in double-digit; IIP contracts by 1.8 %

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New Delhi, Dec 12 :

India’s retail inflation rose to 11.24 percent in November due to higher food prices, while industrial output contracted by 1.8 percent in October, government data showed Thursday.

The growth in the inflation and subdued industrial production has given an indication of continued woes in the Indian economy. INFLATION
The worrying inflation and industrial output data will bear heavy on the Reserve Bank of India’s (RBI) agenda on Dec 18, 2013, when it meets to review the quarterly financial policy of the country.

The wholesale price index (WPI)-based inflation data for November is expected Monday.

The high retail price inflation is not going to make it easy for the RBI to release extra liquidity in the market as RBI’s Governor Raghuram Rajan said that though economy is weaker, but inflation is also higher than what the central bank is comfortable with.

“We will analyse all data. Clearly growth is weaker than we would like, inflation is higher than we would like. In a situation where you have high inflation and low growth you have to calibrate policy carefully. There are some trade-offs that we have to make,” Rajan told reporters at the conclusion of the RBI’s board meeting in Kolkata.

The country’s industrial output has contracted by 1.8 percent during October — from a year-on-year growth of 8.4 percent in the corresponding month of last year — due to poor performance of the mining and manufacturing sectors.

The cumulative growth of the industrial production for the April-October period year-on-year was at a standstill from a growth of about 1.2 percent in the corresponding period of last fiscal, according to data released by the Central Statistics Office (CSO) here.

Mining output in October declined by 3.5 percent as against negative growth of 0.2 percent in the corresponding month of last year. Mining output in September had risen by 3.3 percent.

Manufacturing production registered a decline of two percent during the month under review from a gain of 9.9 percent in October 2012. In September, the sector’s output grew by 0.6 percent.

The electricity sector reported an increase of 1.3 percent in October from 5.5 percent recorded in the corresponding month of last year. In September, the sector had registered a healthy increase of 12.9 percent.

Commenting on the latest data, Chandrajit Banerjee, director general of industry body Confederation of Indian Industry (CII) said the negative growth in industrial performance evidenced at the threshold of the third quarter is disappointing.

“The decline in industrial production during the month casts a shadow on hopes that the economy has bottomed out and there would be a turnaround in industrial activity in the second half of this fiscal,” said Banerjee.

“CII fully appreciates RBI’s compulsions to keep inflation under check. However, it is also important that the RBI takes cognizance of the steep slide of industrial production and reverts to the accommodative monetary policy to revive demand.”

Other leading industry body Federation of Indian Chambers of Commerce and Industry (FICCI) said that an overall slowdown in the mining sector has had a detrimental impact oon the manufacturer sector.

“The manufacturing growth is significantly affected by the de-growth in the mining sector as sectors like metals that are dependent on minerals and have substantive weight in the index are pulling down the growth in manufacturing,” FICCI president Naina Lal Kidwai said.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM), secretary general, D.S. Rawat feared that de-growth in the industry might lead to job losses.

On retail inflation front, prices of vegetables were up by 61.60 percent, fruit prices were up 15 percent, cereals and products have gone up by 12.07 percent and egg, fish and meat went up by 11.96 percent.

Prices of food and beverages were up by 14.72 percent, the data showed.
The price rise was sharper in rural areas.

The CPI-based inflation for rural areas increased 11.74 percent in the month under review. The prices of vegetables in the rural were up by 57.75 percent, fruit prices were up 18.38 percent, cereals and products up by 12.01 percent and egg, fish and meat went up by 10.83 percent.

For the urban areas consumer price inflation grew by 10.53 percent in the month under review. Vegetables became costlier by 71 percent, followed by egg, fish and meat which were up 14.17 percent and cereals and products up by 12.43 percent.

Even the key indices of the Indian equities markets also felt uncertainty ahead of the of the industrial output and retail inflation data.

The 30-scrip S&P Sensex of the Bombay Stock Exchange (BSE), which opened at 21,101.05 points, closed at 20,925.61 points — down 245.80 points or 1.16 percent from its previous day’s close at 21,171.41 points.

The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) too closed in negative territory, down 70.85 points or 1.12 percent at 6,237.05 points. (IANS)