Factories power up; food fuels inflation

Oct IIP highest in 16 months; Nov CPI hits three-month high

- Rhik Kundu

• Moderation in core inflation should provide respite to RBI which may keep rates on hold for longer

Industrial output growth accelerated to a 16-month high of 11.7% in October driven by mining, manufacturing and electricity, and the statistical effect of a low base, while retail inflation in November rose at the fastest pace in three months. While the factory data points to continued momentum in the Indian economy, inflation at elevated levels underlines the central bank’s cautious stance on interest rates, and signals likely measures by the government to curb rising prices.

Data released by the National Statistical Office (NSO) on Tuesday showed that capital goods production, a proxy for fixed investments in the economy, grew in double digits in October. Alongside, double-digit growth in consumer durables, its fastest expansion this fiscal year, highlighted positive consumer sentiment.

In October, output in the manufacturing sector rose 10.4%, mining 13.1%, and power 20.4%. Capital goods production witnessed a 22.6% expansion, while consumer goods output jumped 15.9%. Factory output measured in terms of the Index of Industrial Production (IIP) contracted by 4.1% in October 2022. A favourable base effect and the continued momentum in economic activity helped industrial output stage a strong performance. The surge in factory output preceded the festival of Diwali that fell in November this year.