Retail inflation rises to 3-month high in Nov, Oct industrial growth hits 16-month high

• Higher food prices drove November retail inflation inched up to a three-month high.
• Core inflation softened to 4%, on account of moderation in fuel prices.
• India's IIP growth accelerated to a 16-month high of 11.7% in October.
  

Retail inflation inched up to a three-month high of 5.55% in November driven by higher food prices, according to official data released on Tuesday. The retail inflation based on the Consumer Price Index (CPI) was at 4.87% in October. Inflation had been declining since August when it touched 6.83% .

Retail inflation was 5.88% in November last year.

The rate of price rise in the food basket was 8.7% against 6.61% in October and 4.67% in November 2022, the National Statistical Office (NSO) data showed.

“Food inflation continues to be a challenge with the basket of high inflation products widening: fruits, vegetables, cereals, pulses, and spices. There are clearly supply issues here and given the lower level of kharif output will exert pressure on inflation,” said Madan Sabnavis, chief economist at Bank of Baroda.

Core inflation has softened at 4.1% for the last few months. Personal goods and services and health and education have high inflation.

“An uptick in headline inflation in November 2023 was propelled by food prices; primarily the vegetable prices which are seasonal in nature. Barring food prices, the inflation has moderated across the categories. The core inflation has notably softened to 4%, and a moderation has also been witnessed in fuel prices,” said Vivek Rathi, national director research, Knight Frank India.

The Reserve Bank of India has been tasked by the government to ensure retail inflation remains at 4% with a margin of 2% on either side. RBI governor Shaktikanta Das has reiterated that bringing inflation within the 4% range is its target.

“With inflation being high this month and likely to remain so in December, it will be a concern. The possibility of a rate cut still remains only in Q2 of next year when inflation comes down to 4%,” said Sabnavis.

In the monetary policy announced last week, the RBI projected the CPI inflation at 5.4% for 2023-24, with a reading of 5.6% in the third quarter and 5.2% in the last quarter.

“Going forward, there would be an uptick in consumer headline inflation, however, will be volatile food prices. Broadly, the inflation has moderated, thus would provide the RBI to keep the repo rate unchanged for a while now,” said Rathi.

October IIP growth accelerates to 16-month high of 11.7%

India's industrial production growth accelerated to a 16-month high of 11.7% in October, mainly due to double-digit growth in manufacturing, power and mining sectors' output, according to the official data released on Tuesday. The factory output growth measured in terms of the Index of Industrial Production (IIP) had contracted by 4.1% in October 2022.

The previous high of IIP growth was recorded at 12.6% in June 2022.

“There was all round performance with mining, manufacturing and electricity registering double digit growth. This reflects higher business activity,” said Sabnavis.

During April-October 2023-24, the IIP growth works out to be 6.9%, up from 5.3% in the corresponding period a year ago.

The IIP for September 2023 was revised to 6.2% from provisional estimates of 5.8% released last month. "India's IIP growth rate rises to a 16-month high of 11.7 per cent in October 2023," an official statement said.

It also stated that the growth rates over the corresponding period of the previous year are to be interpreted, considering the unusual circumstances on account of the Covid-19 pandemic since March 2020.

As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector's output grew 10.4% in October 2023 against a contraction of 5.8% a year ago.

Power generation rose 20.4% in October 2023 compared to 1.2% growth in the year-ago period. Mining output rose by 13.1% in the month under review against a 2.6% growth a year ago. As per use-based classification, the capital goods segment grew 22.6% in October this year compared to a 2.4% contraction in the year-ago month.

Consumer durables output during the month grew by 15.9% against a contraction of 18.1%. Consumer non-durable goods output increased by 8.6% compared to a contraction of 13% a year earlier. Infrastructure/construction goods posted a growth of 11.3% against a 1.7% expansion.

The data also showed that the output of primary goods logged 11.4% growth in the month compared to 2.1% in the year-ago period. The intermediate goods output in October rose 9.7% against a contraction of 2.3% growth during the corresponding month last year.

(With inputs from PTI)