Business & Economics

Consumer Food Price Inflation Reached Double Digits, Factory Output Shrank

BP World Bureau | Dec 13 2019 12:22:25 PM
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Consumer food price inflation rose from just 2.99 per cent in August to 10.01 per cent in November, crossed the double digits for the first time since December 2013.

The increase is believed to be due to monsoon delay, drought and crop damage.

The food inflation rate for November not only exceeded the general CPI inflation of 5.54 per cent under the tenure of Narendra Modi government and before the highest was 13.16 per cent recorded in December 2013.

Inflationary expectations of Indian households were affected by the rise in food prices.  RBI can do only little to control onion or dal prices and their survey showed an increase by 1.20 percentage points in the three-month horizon.

Another challenge comes in the form of the shrinking of India's industrial output. Policymakers battling an economic slowdown amid surging food prices have to face shrinking 4.3% in September and 3.8% in October.

Rain affected the crop production but it is said to have fed the groundwater system, thus the future is looking good.

Fuelled by soaring food prices, as prolonged rains dampened vegetable supplies, retail inflation is surging.

The Reserve Bank of India (RBI) may come under pressure to give further monetary stimulus to support the economy if it does not show signs of an uptick by the end of December, say experts.

Mining output, mainly coal and crude oil, contracted by 8% and capital goods production contracted by 20%. Cars and household appliances production contracted by 18%.

DK Joshi, chief economist at Crisil Ltd. said that fiscal and monetary policy measures will have a lagged impact on the economy as industrial weakness continues.