NEW DELHI: Dealing a twin blow to expectations of a healthier economy in the post-Covid era, latest data showed retail inflation is shooting up while industrial activity is losing steam.
According to figures released by the National Statistical Office on Wednesday, retail inflation flared up again in December 2021 to 5.6%, on higher food, clothing and footwear prices.
This is the highest monthly retail inflation recorded in the past six months and is within kissing distance from the Reserve Bank of India’s upper limit of 6%.
According to analysts, low base effect could have led to food and beverages prices rising 4.5% in December compared with 2.6% in November. However, economists welcome the softening of fuel, oil and fat prices. They also see broad-based moderation in food prices in January 2022.
“The overall falling sequential momentum on food prices is expected to continue in January but the sticky core inflation and adverse base effect poses risk of the next reading being higher than 6%,” said Upasna Bhardwaj, economist, Kotak Mahindra Bank.
Meanwhile, the Index of Industrial Production (IIP), which measures the industrial activities in the economy, grew the slowest in nine months. The IIP recorded an increase of 1.4% in November, down from 3.2% growth in October.
Both mining and manufacturing growth in November showed a tepid growth of 5.0% and 0.9%, respectively (11.3% and 2% in October). Electricity grew 2.1% in November.
“It is very clear that the GDP growth took a serious hit in October-November 2021 and thus, the third quarter of the financial year. I am confident that the consensus of 6.3% y-o-y growth forecast will be revised down and 5-5.5% looks more likely,” said Nikhil Gupta, chief economist at Motilal Oswal Financial Services.
World Bank projections
World Bank has retained India’s GDP growth forecast for the current fiscal at 8.3% as the recovery is yet to become broad-based.
It also upgraded its growth forecast for FY23 and FY24 to 8.7% and 6.8%, respectively, citing improved investment outlook.