India's inflation at 15-month high in Dec

New Delhi, January 12

India’s consumer price inflation accelerated to 5.6 per cent in December, the Statistics Ministry said today, with prices rising at a faster pace than economists had expected.

A steep increase in food prices drove the inflation rate up to a 15-month high in December.

It marked the fifth month in a row that inflation had gained pace, with consumer prices increasing 5.4 per cent year-on-year in November and five per cent in October.

The Reserve Bank of India (RBI) is unlikely to lower the headline interest rate further when it meets for a monetary policy review in February, economists said, after making four cuts last year.

However, the runaway inflation that India once battled remains largely in check and still comfortably below the central bank’s target of six per cent.

“The pick-up in inflation was in large part due to a rise in food inflation, due to delays in the sowing of the rabi (winter) crop amid unusually warm temperatures in recent months,” Shilah Shah, an economist at Capital Economics in London, wrote in a note.

In disappointing news for the economy, industrial output shrank 3.2 per cent in November compared with the same month a year earlier, figures released today showed.

It comes after factory output expanded 9.8 per cent in October, the fastest pace of growth in five years.

RBI Governor Raghuram Rajan has made controlling inflation a priority, setting a target of bringing it consistently below six per cent by January 2016 and to four per cent for the 2016-17 financial year.