India’s industrial output shrank while inflation swelled, official data released showed, highlighting challenges for policymakers battling an economic slowdown amid surging food prices. Factory output contracted 3.8% in October after shrinking 4.3% in September, in sharp contrast with an 8.4% expansion in October last year. Retail inflation continued to surge in November, fuelled by soaring food prices, as prolonged rains dampened vegetable supplies. Experts said that if economic growth does not show signs of an uptick in the December quarter, the Reserve Bank of India (RBI) may come under pressure to give further monetary stimulus to support the economy, given the fact that retail inflation is driven by food prices and is not across the board. Vegetable prices surged 36% in November from a year ago, data released by the National Statistics Office showed. Pointing to a demand slump in the economy, manufacturing output, which accounts for three-fourth of factory output, contracted 2.1% in October. The contraction in consumer durables deepened in October. Production of items such as cars and household appliances contracted 18% in October, after shrinking 9.9% in the month before.

(Live Mint)