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Inflation likely accelerated in November; factory output seen rising

10 December, 2015

India’s industrial output likely grew in October at its strongest pace this year as investment recovery takes hold, according to a survey of economists by VCCircle. 

The survey showed also that consumer inflation likely picked up pace in November for a fifth straight month as pulses prices rose.

Industrial production is estimated to increase 6.75 per cent from a year earlier in October, according to the median of projections by 17 economists. Output had risen 3.6 per cent in September and 6.3 per cent in August.

Devendra Kumar Pant, chief economist at ratings firm Ind-Ra, said the investment recovery, as indicated by 7.4 per cent economic growth in the July-September period, is likely to continue and would support capital goods production. But he added: “Industrial recovery is still in its early stages and a full-blown recovery would require more policy support.” 

While economists expect a rise in industrial production, data last week showed the index of eight core industries grew 3.2 per cent in October from a year earlier. This reflected poor growth in output of steel, natural gas and crude oil. The core industries comprise nearly 38 per cent of the weight of items included in the Index of Industrial Production.

Also, recent data from Nikkei’s purchasing managers’ index report is not so upbeat about the economy. Nikkei’s business activity index, which measures private sector output, inched closer to contraction at 50.2 on the back of subdued demand as manufacturing activity slumped to the lowest level in 25 months.

With the government banking upon industrial recovery to take hold, a slump in demand may cause problems for the economy. This may lead to India missing its revised 7.5 per cent growth target set by the government for 2015-16.

The government will release industrial production data for October on Friday.

Inflation worries 

Consumer inflation is likely to accelerate to 5.4 per cent from a year earlier in November, according to the median of estimates by the 17 economists.

The uptick in retail inflation is due primarily to a rise in prices of pulses. While consumer inflation for November is expected to remain below the Reserve Bank of India’s target of 6 per cent for January 2016, it would be above the central bank’s medium-term goal of 5 per cent.

Inflation prospects don’t seem to be comforting as the government is set to increase salaries and allowances of 50 lakh central government employees from 2016.

Meanwhile, wholesale inflation likely remained in the negative territory for the 13th straight month. Wholesale prices likely fell 2.54 per cent during November, according to the survey of economists. This would be a jump from the 3.81 per cent decline in October. But with fuel prices slumping again, the deflationary trend for wholesale prices is likely to continue for a few more months.

The government will release both inflation numbers for November on Monday.


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Inflation likely accelerated in November; factory output seen rising

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