Consumer price inflation spikes to 4.88% in November, industrial output growth ...

Published On: 12, Dec 2017 | Source: Hindustantimes

India’s annual retail inflation accelerated in November to a 15-month high of 4.88% even as industrial output growth slowed to 2.2% in October from 4.2% a year earlier, government data showed on Tuesday.

The rise in retail inflation, measured by the consumer price index, was mainly driven by faster rise in prices of food and fuel products.

Separate data released by the government showed that India’s factory output measured by the index of industrial production (IIP) slowed to 2.2% in October from an upwardly revised 4.14% in September.

In October, while mining output was stagnant, manufacturing and electricity grew at 2.47% and 3.2% respectively. Capital goods production, which indicates investment demand in the economy, grew for the third consecutive month in October, by 6.8%. However, consumer durable goods contracted for the second consecutive month at 6.9%.

The Reserve Bank of India (RBI) had flagged the upward pressure on inflation, including the rising fuel prices and the increase in house rent allowance (HRA) to central government employees, in its monetary policy review earlier this month.

“The impact of HRA by the Central Government is expected to peak in December. The staggered impact of HRA increases by various state governments may push up housing inflation further in 2018, with attendant second order effects,” the RBI had said, adding that the recent rise in international crude oil prices may sustain, especially on account of the OPEC’s decision to maintain production cuts through next year.

“In such a scenario, any adverse supply shock due to geo-political developments could push up prices even further,” it added.

Despite recent increase in prices of vegetables, some seasonal moderation is expected soon as winter arrivals kick in. Prices of pulses have continued to show a downward bias.

The GST Council in its last meeting has brought several retail goods and services to lower tax brackets, which should translate into lower retail prices, going forward. On the whole, inflation is estimated in the range 4.3%-4.7% in Q3 and Q4 of this year, including the HRA effect of up to 35 basis points, with risks evenly balanced.