India faces double whammy

New Delhi: The growth-inflation mix worsened for India. The country’s industrial production contracted to its lowest level in over four years at 3.2 per cent in November, while retail inflation (consumer price inflation) picked up for the fifth straight month, to 5.6 per cent in December.

However, the rise in inflation was much slower than in the previous months as the low base effect wore out. This could make it difficult for RBI governor Raghuram Rajan to slash interest rates once again.

“This month, higher inflation was driven by nearly 0.4 per cent jump in food inflation (mainly sugar, meat, fish and vegetables) and higher fuel inflation (led by the hike in excise duty last month),” said Crisil.

It said that pulses inflation stabilised at a higher level after rising sharply for nearly a year. Pulses rate of price growth stood at 45.92 per cent, only marginally down from 46.08 per cent in November. Meat and fish price rose by 6.57 per cent and oil and fats by 7.06 per cent.

Richa Gupta, senior director, Deloitte India, however, claims that retail inflation figures are in line with expectations. “The increase was primarily on account of an adverse base effect in the food category and a minor uptick in core inflation. Importantly, pulses prices rose very marginally and it seems that pressures will cool off in the coming months as indicated by some high frequency indicators,” she said.

The manufacturing sector fell the most in November by contracting by 4.4 per cent. The capital goods shrunk by 24.4 per cent. However consumer durables  grew by 12.5 per cent, even as non-consumer durables contracted by 4.7 per cent. “The slowdown in activity in November was accentuated due to the floods witnessed in Chennai, which is an important centre for industrial activity in India,” said Crisil.

However, some items which registered high positive growth include ‘gems and jewellery’ (253.7 per cent), ‘sugar machinery’ (78 per cent), ‘lubricating oil’ (66.5 per cent) and ‘wood furniture’ (46.9 per cent) among others.