Advertisement

HindustanTimes Mon,20 Oct 2014

Retail inflation 'higher than comfort', home loans may get costlier

HT Correspondent, Hindustan Times  Kolkata/New Delhi, December 12, 2013
First Published: 18:52 IST(12/12/2013) | Last Updated: 01:49 IST(13/12/2013)

Here’s more proof of the fragile state of the Indian economy. Retail inflation, a measure of actual shop-end prices consumers pay, rose sharply to a nine-month high of 11.24% in November from 10.17% in October.

Advertisement

Vegetable prices grew 61.6% during the month from 45.7% in October while overall food inflation in November stood at 14.72% from 12.56% in the previous month, showing how costly food has forced millions of Indians to make expenditure adjustments.

Read: End in sight for the price pinch?

"We will analyse all data. Clearly growth is weaker than we would like, inflation is higher than we would like," Reserve Bank of India (RBI) governor Raguram Rajan told reporters at the conclusion of a board meeting in Kolkata.

Industrial output — a measure of production across factories — contracted 1.8% in October from 2% in September, mirroring tepid sales of consumer goods such as cars and televisions even during the festival month.

Your home loans could get costlier and your budget could get squeezed further as the RBI could announced another round of interest rate hike next week to tame galloping inflation.

It could get worse with the rupee falling to 61.81 to a dollar — a drop of 58 paise compared to Wednesday’s close — amid fears that the US will begin unwinding its easy money policy that will prompt foreign funds to move dollars away from emerging markets such as India.

The toxic mix of high inflation, low investments and falling rupee could not have come at a worse time for the ruling UPA government with national elections about four months away.

Price rise was a major issue in the recently concluded assembly election in which the Congress party returned with a poor showing.

Retail prices of almost all everyday products and services – from food to footwear and movie tickets to medicines – surged in October, data on Thursday showed, signalling India’s inability to control household inflation, partly stoked by a falling rupee.

Rising prices and sliding growth remain key worries for the government strung in a by a heavy debt burden.

Business leaders have been demanding a cut in lending costs to spur investments, vital to spin jobs and multiply income and revive the economy that is battling to climb out of a decade low slowdown.

“Unless interest rates are brought down, we are not going to see much improvement in the index in the near term as this would be important to stimulate demand and revive investments,” said Naina Lal Kidwai, president of industry federation Ficci.


Advertisement
more from Business

Sensex vaults 321 pts on fuel reforms, BJP wins in state polls

Diwali seems to have come early to Dalal Street as benchmark Sensex on Monday zoomed 321 points, its best single-day gain in over a week, on back of much-awaited fuel reforms and hopes of Modi government going ahead with further economic initiatives after BJP's wins in state polls.
markets
Advertisement
Most Popular
Advertisement
Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved