India CPI up, factory output slows

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NEW DELHI: India’s consumer prices rose five percent in October, accelerating from a 4.41 percent increase in September, the Statistics Ministry said Thursday, with economists saying imminent interest rate cuts are now unlikely.

The retail inflation rate was driven higher by rising fuel and food prices, with recent spikes in the cost of sensitive staples such as pulses and onions drawing outrage from Indian consumers.

The October figure was slightly higher than a 4.9 percent gain predicted by a Bloomberg survey of 33 economists.

“Consumer price inflation is right in line with expectations. We had expected food and fuel pressures, which are exactly the way it played out,” Shubhada Rao, Chief Economist at Yes Bank in Mumbai told AFP.


“While we rule out an interest rate cut in December we do see some room opening up for an additional rate cut between January and September next year,” she said.

Industrial production grew 3.6 percent in September compared with the same month a year earlier, after growing 6.4 percent year-on-year in August, official data released Thursday showed.

The Reserve Bank of India has cut interest rates four times this year in an attempt to reduce borrowing costs to stimulate growth and aid India’s economic recovery.

The central bank was given room to act by cooling retail inflation that has tracked sharply lower than the eight percent levels recorded in 2014.

“We think that the window for further interest rate cuts has now closed,” Shilan Shah, an economist at Capital Economics in London said.

India’s economy expanded seven percent in the first quarter of the current financial year, matching China and outpacing other major economies, but down from 7.5 percent in the previous quarter.

AFP

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