Factory output at 21-month high

Industrial output growth raced to a near two-year high in November, powered by a robust manufacturing sector, while retail inflation soared to a 17-month high in December on the back of sticky food and fuel prices, dashing hopes of an immediate interest rate cut by the Reserve Bank of India.

Industrial output grew an annual 8.4% in November, sharply higher than the downwardly revised 2% in the previous month and 5.1% a year ago.

The manufacturing sector rose an impressive 10.2% in November compared with 4% in November 2016 while the capital goods sector, which is seen as a key gauge of industrial activity, rose an annual 9.4% in November, higher than the 5.3% posted in the year earlier period.

Some economists, however, said the November data should be read with caution.

The numbers indicate that the industrial sector may be shrugging off the impact of demonetisation and GST rollout issues. If the momentum continues, it augurs well for overall economic growth and will result in an investment pick up in the months ahead. But a sudden surge in demand will also put further pressure on prices.

Separate data showed retail inflation as measured by the consumer price index rose an annual 5.2% in December, higher than the previous month’s 4.9%. Food inflation rose an annual 5% compared with 1.4% in December 2016. Vegetable prices rose 26.4% in December while fuel and light prices shot up 8% during the month. Rural inflation rose 5.3% during the month while urban inflation was 5%.

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