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India Inflation Quickens, Industrial Output Grows

India Inflation Quickens, Industrial Output GrowsIndia Inflation Quickens, Industrial Output Grows

India’s consumer price inflation quickened in December for the first time in five months, data showed Monday, dimming hopes of a new year rate cut by the central bank.

But more promising figures released simultaneously by the government showed a growth in monthly industrial output, reversing a sharp fall, AFP reported.

Despite the continued slump in global crude oil prices, consumer inflation rose to 5.0 percent year-on-year in December, up from 4.38 percent in November which had marked a near three-year low.

The Reserve Bank of India (RBI) has been under pressure from the government and markets to cut  high interest rates to boost economic growth, but governor Raghuram Rajan has insisted on first winning the battle against inflation.

“The probability of any rate cut is very low right now. The bump-up in inflation, though expected, shows how tough the RBI’s job of taking a call on when to reduce rates is going to be,” said Arun Singh, senior economist with Dun & Bradstreet.

The RBI, which is due to hold its next policymaking meeting on February 3, has not cut rates since May 2013.

  Boost

The pick up in industrial output will however come as a welcome boost to Prime Minister Narendra Modi, who came to power in May last year promising to reignite flagging economic growth.

Production by India’s factories, mines and utilities rose 3.8 percent in November compared to a year earlier, the latest data showed, slightly more than analysts had predicted.

The ongoing summit in Modi’s western home state is designed to attract investment to India. It has been attended by a host of top global companies and politicians including US Secretary of State John Kerry.

At the event on Sunday, Modi promised “truly unlimited” reforms to transform India’s economy – Asia’s third largest – into a global powerhouse.

  Kerry Tours Ford Co.

Kerry Monday toured a state-of-the-art $1 billion Ford Motor company plant due to open in western India, which will double the American automaker’s annual output in the country.

On the second day of a short visit to the western Indian state of Gujarat, Kerry aimed to highlight the keenness of US businesses to invest in India.

The plant at Sanand will be Ford’s second in India and the first vehicles and engines are due to roll off the assembly line by the end of the first quarter of 2015. It will eventually produce 50 cars an hour in a process that will be 95 percent automated.

Financialtribune.com