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India Consumer Inflation Slides, Industrial Output Contracts

India Consumer Inflation Slides, Industrial Output ContractsIndia Consumer Inflation Slides, Industrial Output Contracts

India’s consumer inflation slowed to its lowest rate in nearly three years last month, official data showed Friday, fuelling hopes of a rate cut in the new year.

Consumer inflation fell to 4.38 percent in November, down from October’s 5.52 percent, after a weakening of global crude oil prices – a key driver of inflation in India, AFP reported.

Consumer inflation was riding at over 10 percent last year but economists say Reserve Bank of India governor Raghuram Rajan’s aggressive policies to curb price rises appear to be paying dividends.

While addressing an industry body at an event in New Delhi on Friday, he said, for “Make in India” to succeed, the government needs to implement ambitious infrastructure plans and reduce the cost of doing business in India. But “Make for India” is equally important because external demand is weak, NDTV reported him as saying.

November’s consumer inflation was the lowest since the government introduced the current price index in January 2012 and well below the RBI’s target of eight percent for January 2015.

India’s central bank kept interest rates unchanged on Tuesday despite growing calls to ease monetary policy, saying a reduction would be “premature”.

  Rise in Interest Rates

But the bank indicated it may cut interest rates in the new year to boost flagging economic growth.

Finance Minister Arun Jaitley has indicated he would favor a cut in borrowing costs, held at 8.0 percent since last January, to boost investment and consumer spending.

India’s economy has posted two years of sub-five-percent growth, the longest slowdown in a quarter century.

Rises in prices of food especially have caused huge hardship for India’s 1.2 billion population, of which nearly a quarter live in severe poverty, according to the World Bank.

  Industrial Output

India’s monthly industrial output contracted and inflation hit a near three-year low, official data showed, fuelling hopes of a rate cut next year.

Production by India’s factories, mines and utilities was down 4.2 percent in October from a year earlier.

India’s economy grew 5.3 percent in July-September year-on-year, significantly slower than the previous three months, adding to the pressure on the RBI.

The central bank has forecast growth of 5.5 percent this year, slightly below the government’s target of 5.8 percent.

 

Financialtribune.com