Wednesday, 12 November 2014

India Inflation Dips to Three Year Low

Asia’s third largest economy, India’s retail inflation fell to a three year low of 5.52% in October and industrial output rebounded to 2.5% in September.

The more than one percentage point drop in inflation rates over September’s 6.4 per cent might help to bring down prices of essentials and rekindling hopes that cooling prices will nudge the RBI to cut lending rates leading to lower EMIs in its monetary policy next month, analysts said.

They added that oil companies may cut further petrol and diesel on plunging global crude oil costs, a move that will aid government's efforts to keep inflation low and stable.

The Index of Industrial Production (IIP) surged in September from a flat 0.4% growth in the previous month buoyed by robust power and capital goods output.

Capital goods output, a proxy for investment activity, grew 11.6% in September mirroring that companies may have begun to add capacity lines expecting demand for goods to pick up.

The manufacturing sector, which constitutes over 75% of India’s total industrial output, grew 2.5% in September compared to a growth of 1.4% a year ago.

The fall in retail inflation measured by the consumer price index was driven by a fall in food inflation to 5.59% In October from 7.67%. Inflation fell in vegetables, which accounts more than a tenth of the food basket, contracted 1.45%.


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