The Consumer Price Index, which measures inflation in India, dropped to 3.41% in December 2016 from 3.63% the previous month. This is the fifth consecutive month that the CPI has declined. The 3.63% figure from November 2016 marked a two-year low in retail inflation. It stood at 5.61% in December 2015, according to data from the Central Statistics Office.
The cost of vegetables dropped by 14.5% year on year, while that of pulses and related products fell by 1.57%. Overall, the cost of food and beverages rose by 1.98%.
Moreover, the Index for Industrial Production stood at 175.8 in November 2016 as compared to 178 the previous month. Factory output saw a significant 5.7% growth for the month, year on year, according to the Central Statistics Office.
The IIP for the manufacturing sector saw 5.5% year-on-year growth. Of the 22 industry groups in this sector, 16 saw positive growth. The radio, TV and communication equipment and apparatus group recorded the highest positive growth of 32.2%, followed by 23.2% growth in both the electrical machinery and apparatus group as well as the motor vehicles, trailers and semi-trailers group.
There was 3.9% growth in the output of the mining sector and that of 8.9% in the electricity sector, year on year.
Analysts had attributed the fall in retail inflation to demonetisation, saying it had affected demand and people’s purchasing power. Consumer spending, which makes up 55% of India’s economy, was hit significantly after the currency ban because more than 90% of citizens prefer to pay by cash, experts had said.
The drop in retail inflation followed the Monetary Policy Committee’s surprise move on December 7 to keep the Reserve Bank of India’s repo rate unchanged. The key rate, which helps control inflation in the country, was maintained at 6.25% under the liquidity assessment facility, the RBI had said.