NEW DELHI: A day after the International Monetary Fund remarked that India is better placed among global economies that are slipping into a slowdown phase, government data released on Wednesday indicated the going may become tough for the country.
According to the latest numbers, retail inflation as measured by the Consumer Price Index (CPI) soared to 7.4% in September a four-month high while the Index of Industrial Production (IIP), which measures the growth of industry groups, contracted 0.8% in August.
A breakdown of the IIP data shows manufacturing output shrank 0.7% with the most dip registered in apparel, leather, pharma products and electrical equipment. Mining output saw a drop of 3.9%, while electricity output grew 1.4%.
ALSO READ | After 25 years, another widespread emerging markets crisis in the offing; India must worry too
Meanwhile, Consumer Price Food Index surged 8.6% in September compared with 7.62% in the previous month. Vegetables registered the highest rise at 18.05%, spices at 16.88% and cereal and products at 11.53%.
The spike in September inflation will be a cause of concern for the Reserve Bank of India, which is trying hard to cool the price surge. According to experts, the central bank will be forced to increase interest rates further. “RBI has done an effective interest rate defence to tackle the mounting inflation. More ‘hawkish’ policy announcements are expected to deal with inflation and global economic headwinds, especially from the US Federal Reserve,” said Lekha Chakraborty, professor at the National Institute of Public Finance and Policy.
She, however, cautioned not to read too much into high-frequency data like the IIP numbers, adding, “The overall trend in growth is significant. The fiscal-monetary policy coordination is what is crucial for sustained growth recovery.”
Aditi Nayar, chief economist at rating agency ICRA, said the quantum of the next rate hike will be determined by how much the inflation print recedes in October 2022, as well as the strength of the GDP growth for Q2 FY2023.