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Inflation soared up to 11.24%, industrial production shrank to 1.8%

Dec 13, 2013 18:18 IST

In a double whammy for the UPA government, retail inflation soared to a nine-month high of 11.24% and output shrank to 1.8%. These developments may prompt the Reserve Bank to further increase a key interest rate.

Official data released on 12 December 2013 showed retail inflation, as measured by the consumer price index (CPI), touched a nine-month high of 11.24% in November 2013 on account of costlier vegetables and fruits such as onions and tomatoes.

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Inflation which was in double digits for several months until March 2013 declined to 9.39% in April 2013 and came back to double digits in October 2013. As per the revised data, CPI based inflation for October 2013 moved upward to 10.17% as compared to preliminary estimate of 10.09%.  

The data also showed that the provisional inflation rates for rural and urban areas for November 2013 were 11.74% and 10.5%, respectively.

For CPI inflation, price data are collected from select towns by the National Sample Survey Organization (NSSO) and from certain villages by the department of posts.

The index of industrial production (IIP) contracted in October 2013 after three months, mainly due to poor performances in manufacturing, mining and consumer durables. Factory output, as measured in terms of the IIP, grew by 8.4 per cent in October 2012.

Meanwhile, IIP growth for September 2013 was revised marginally upwards to 1.96% from the provisional estimate of 2%.
IIP dipped by 1.8% in June 2013. According to data released by the government, industrial output for April-October 2013 period remained flat as compared to 1.2% in the same period of 2012-13.

The manufacturing sector comprising over 75% of the IIP, declined by 2% in the month of October 2013 as compared to the growth of 9.9% in 2012. During April-October 2013, the sector's output contracted 0.3% compared to a growth of 1.1% in the same period in 2012.

The mining sector, with a weight of about 14% in IIP, also saw a contraction of 3.5% in October 2013 as against a dip of 0.2% in the same period in 2012. During April-October 2013, the mining output shrank by 2.7% as against a contraction of 1% in the same period in 2012.

Power generation, however, posted a growth of 1.3% in October 2013 as compared to 5.5% in October 2012. Expansion in power generation was at 5.3% in April-October 2013 as compared to 4.7% in April-October 2012.

In terms of industries, 10 out of 22 industry groups in the manufacturing sector have shown negative growth during the month of October 2013.

The Indian economy, Asia's third-largest, faces a difficult situation where growth has slowed to a decade low but price pressures have remained stubborn. It has one of the highest inflation rates in the world, and the highest in Asia. Weak growth and high inflation also complicated the policy choice for the central bank.

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