India's Retail inflation for the month of October breached the Reserve Bank of India's (RBI) medium-term target of 4% for the first time since July 2018 due to higher food prices even though RBI had predicted that food prices "are likely to moderate as winter supplies enter the market". Inflation touched 4.62, according to the data released by the statistics office on Wednesday, compared to 3.99% in the month of September.
Retail inflation surged to 4.62% in October, mainly on account of higher food prices, as per the govt data.
An overwhelming majority of data have pointed to continued weakness in the economy that expanded 5% in the quarter ended June -- the slowest pace in six years. The slump gives members of the MPC reason to stick with their accommodative policy stance, although room for a deep cut may be limited given the rebound in headline inflation.
Data showed industrial production contracted 4.3% in September, the worst performance since October 2011.
In particular, the sharp 20.7 per cent decline in capital goods production did not bode well for investment, a sign that the economic slowdown has become entrenched, according to the bank.
In Q2 loan growth in India has dropped to demonetisation lows of 6% , as NBFC lending has pulled back.
The growth forecast for FY20 has now come down to 5 per cent from 6.1 per cent earlier.
Contraction in manufacturing and mining activity plunged India's September factory output deep in the red. The Index of Industrial Production (IIP) declined (-) 4.3 per cent in September from (-)1.40 per cent in August 2019.
As per the Index of Industrial Production (IIP), factory output contracted 4.3% in September, the lowest in almost eight years in this series, which began April 2012 (with 2011-12 as the base year) and the lowest since October 2011when compared with the earlier series with base year 2004-05. IIP had contracted 5% in October 2011.
Encouragingly, cyclical growth momentum is getting a hand from reduction in rates and surplus liquidity conditions, wrote Radhika Rao, Vice Senior President and Economist at DBS in Singapore. Looking past the transient spike in inflation, there is room for monetary authorities to provide more support this year, added Rao.
The Dun & Bradstreet Composite Business Optimism Index noted that optimism for net profits stood at 59 per cent - a decline of 7 percentage points as compared to the September quarter 2019. Optimism for new orders stood at 35 per cent - down 22 percentage points as against the previous quarter.
Nearly 85% of respondents of a Reuters poll forecast retail inflation to breach the RBI's medium-term target.
In a statement soon after Moody's lowered the outlook to negative from stable, the Finance Ministry said India continues to be among the fastest-growing major economies in the world. "India's relative standing remains unaffected," it said citing IMF's recent World Economic Outlook putting Indian economic growth at 6.1% in 2019.
The ratings firm on Friday downgraded India's outlook to ‘negative’ from ‘stable’.
Fitch said it was revising the fiscal deficit forecast as revenue collection is likely to fall far short of the projections in the FY2019/20 Union Budget due to weak GST and corporate tax collections. Weak revenue collections resulting from sluggish economic growth and government's sweeping corporate tax rate cut were the other reasons, it said.
More than 90 per cent of storekeepers indicated footfalls lower than the last year’s festival period.
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