India’s factory output as well as retail inflation accelerated in August and September, respectively. While the rise in industrial output suggests a gradual economic recovery, higher inflation indicates pricing pressures building up in the economy.
In August, the Index of Industrial Production (IIP) rose to a 3-year high at 6.4% from a provisional 4.2% in the previous month. While manufacturing output grew at a robust 6.9%, electricity generation grew at 5.6% and mining output grew at 3.8%.
Retail inflation quickened to 4.41% in September from 3.74% a month ago. The hardening in retail inflation should not come as a surprise due to reversal of favourable base effect from September onwards. However, food inflation accelerated more quickly than economists were expecting, rising to 3.88 per cent versus 2.20 per cent last month.
The Reserve Bank of India (RBI) in its on September 29 lowered its benchmark interest rate by a higher-than-expected 50 basis points to a four-year low, seeking to ease borrowing costs and stimulate economic growth by taking advantage of slower inflation. (One basis point is one-hundredth of a percentage point.)
(With agency inputs)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)