Economy takes a double hit: Retail inflation soars, industrial output slumps
New Delhi: In a concerning development for the economy, retail inflation witnessed a significant uptick, reaching a four-month high of 5.69 per cent in December. Simultaneously, industrial production experienced a downturn, hitting an 8-month low of 2.4 per cent in November, as per government data released on Friday.
The annual retail inflation, measured by the Consumer Price Index (CPI), saw a notable increase attributed primarily to a surge in the prices of vegetables, pulses, and spices, according to the provided data. In comparison, inflation stood at 5.55 per cent in November 2023 and 5.72 per cent in December 2022.
Data from the National Statistical Office (NSO) revealed that the rate of price rise in the food basket, constituting nearly half of the CPI, escalated to 9.53 per cent in December. This marked a significant rise from 8.7 per cent in the preceding month and 4.19 per cent in December 2022.
August of the current fiscal year recorded the previous high inflation at 6.83 per cent.
Shifting focus to industrial output, as measured by the Index of Industrial Production (IIP), growth decelerated to 2.4 per cent in November, reaching the lowest level in the current fiscal year. The IIP for October 2023 was revised to 11.6 per cent from provisional estimates of 11.7 released last month, while it was 7.6 per cent in November 2022. March 2023 marked the previous low of IIP at 1.9 per cent.
The slowdown in IIP growth during November primarily stemmed from a lackluster performance by the manufacturing sector, reporting a growth of 1.2 per cent during the month compared to 6.7 per cent a year ago. Power generation growth also slowed to 5.8 per cent in November 2023 compared to 12.7 per cent growth in the year-ago period. Mining output growth decreased to 6.8 per cent from 9.7 per cent a year ago.
In terms of use-based classification, the capital goods segment contracted by 1.1 per cent in November this year, compared to a growth of 20.7 per cent in the year-ago month. Consumer durables output declined by 5.4 per cent during the month, against a 5 per cent growth a year ago. Consumer non-durable goods output contracted by 3.6 per cent compared to a 10 per cent expansion a year earlier. Infrastructure/construction goods reported a marginal growth of 1.5 per cent against a 14.3 per cent expansion.
The data also indicated that the output of primary goods logged 8.4 per cent growth in the month compared to 4.8 per cent in the year-ago period. The intermediate goods output in November remained flat at 3.5 per cent.
The latest CPI data showed that inflation in the vegetable segment was 27.64 per cent on an annual basis, followed by ‘pulses and products’ at 20.73 per cent and spices at 19.69 per cent. However, prices of ‘oil and fats’ declined by 14.96 per cent.
Notably, retail inflation was higher in rural areas at 5.93 per cent in December, while it stood at 5.46 per cent in urban India. However, inflation in the food basket was lower in rural areas compared to urban centers.
The Reserve Bank of India has been assigned the task by the government to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
According to NSO data, the lowest inflation was witnessed in Delhi at 2.95 per cent, and the highest was in Odisha at 8.73 per cent.