India’s industrial production growth fell to 2.7% year-on-year in November, the slowest in 18 months from over 11.3% growth in the previous month, adding to worries of the government’s macro-economic managers who are grappling for options to sustain growth while keeping prices under check.
“We shall have to look into (the fall in factory output growth) and take corrective measures so that IIP numbers revive in the remaining four months,” finance minister Pranab Mukherjee said.
The runaway price line and the sharp drop in factory output growth has upset the government’s plans of implementing a carefully calibrated exit plan of the fiscal stimulus package in this year’s budget.
Food prices rose 18.32% in end-December to reach the highest level in a year and have remained stubbornly high. It has also spread into core inflation, or prices of goods other than food and fuel.
Originally, the government had planned a two percentage point hike from 10 to 12 % in central excise duty.
“The plan was to fully withdraw the stimulus when the recovery in private demand — both consumption and investment — is sufficiently robust. While these have been achieved, high prices are a key concern. This may force the government to push back the planned increase in excise duty,” the official said.