Retail inflation rises to 5.21 per cent, dashes rate cut hopes

Retail inflation crossed the RBI's comfort level and rose to 5.21 per cent in December on rise in prices of food items, egg and vegetables, dashing hopes of interest rate cut in the near future.

Published: 12th January 2018 06:35 PM  |   Last Updated: 13th January 2018 08:56 AM   |  A+A-

bazaar, market, prices, inflation, economy

Shops in Chandni Chowk(Image for representational purpose only)

By Express News Service

NEW DELHI: The finance ministry has got some breather ahead of the Budget, as the Index of Industrial Production (IIP) grew at 8.4 per cent in November, a 17-month high, backed by double-digit growth in the manufacturing sector, showing signs of economic revival. “The general index for the month of November 2017 stands at 125.6, which is 8.4 per cent higher than the level in the month of November 2016,” the CSO’s report on IIP for November said.

Growth was driven by robust recovery by the manufacturing sector, which constitutes 77.63 per cent of the IIP, grew at 10.2 per cent on a year-on-year basis. Electricity production was at 3.9 per cent and the mining output was at 1.1 per cent.

‘Manufacture of pharmaceuticals, medicinal chemical and botanical products’ has shown the highest positive growth of 39.5 per cent, followed by 29.1 per cent in computer, electronic and optical products and 22.6 per cent in ‘manufacture of other transport equipment’.Capital goods output grew 9.4 per cent in November against 5.3 per cent a year ago. Consumer non-durables showed an output growth of 23.1 per cent against 3.3 per cent in November 2016 while consumer durables slowed to 2.5 per cent.

Also, the Consumer Price Index (CPI) for December has reached a staggering 5.21 per cent after a 15-month high of 4.88 per cent was recorded in November due to higher food and fuel prices. Overall, 15 of the 23 industry groups in the manufacturing sector have shown positive growth during November 2017.

“It is important to see if this is sustained over the next two months to conclude that there is a real turnaround. A single data point could suggest a correction for the destocking in the past,” ICRA said. The December CPI food inflation increased marginally to 4.96 per cent against 4.36 per cent in November. The CPI for food and beverage inflation was at 4.85 percent versus 4.41 per cent in November.

Aditi Nayar, principal economist at ICRA, said, “The early indicators for industrial production in the organised sectors in November 2017 provide mixed signals, with a deterioration in pace of YoY growth of output of Coal India and electricity generation, but a sharp improvement in the expansion of automobile production.”

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