India’s retail inflation probably fell in November from October but remained above the Reserve Bank of India’s target, amid high food and petrol prices, a Reuters poll of economists showed. Retail inflation has stayed above the central bank’s comfort zone of 2 percent to 6 percent for seven consecutive months, a streak not seen since August 2014.
The Dec. 4-9 poll of 48 economists forecast a drop in inflation in November to 7.10 percent from 7.61 percent in October, which was the highest since May 2014. If realised, November’s rate would be above 7.0 percent for the third consecutive month.
”Inflation for November is likely to be lower than October as there was some moderation in prices of vegetables in particular as well as pulses,” said Madan Sabnavis, chief economist at CARE Ratings. ”On the upside, petrol prices had increased which worked in the other direction.”
At its Dec. 2-4 meeting, the RBI kept its key repo rate at 4.0 percent and the Monetary Policy Committee retained its accommodative stance while ensuring ample liquidity, playing a delicate balancing act of curbing high inflation and bolstering a nascent economic recovery. The central bank also said inflation would remain elevated.
”There is still a lot of liquidity sloshing around in the system, which in combination with normalizing economic activity might produce a dangerous inflationary cocktail,” said Hugo Erken, head of International economics at Rabobank.
The Indian economy will suffer its worst contraction on record this fiscal year, and recent government stimulus does not go far enough to significantly boost activity depressed by the coronavirus pandemic, according to economists polled by Reuters.
Asia’s third-largest economy contracted 7.5 percent in the quarter ending in September after declining 23.9 percent in the April-June quarter.
The poll predicted industrial output rose 1.1 percent in October from a year earlier on strong manufacturing production ahead of the festive season. In September, industrial production was in positive territory for the first time since February 2020. Infrastructure output, which accounts for about 40 percent of total industrial production, contracted 2.5 percent in October.
First Published: Dec 10, 2020 10:02 AM IST
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