Inflation Spikes, Negative Growth Accelerates India’s Economy Slowdown

Amid speculations of recession, new data indicates massive inflation spikes and further contraction in factory output combined with negative growth in all core sectors.

Factory output, measured in terms of Index of Industrial Production (IIP), contracted by 3.8% in October after shrinking 4.3% in September against 8.4% in October last year, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Thursday.

The IIP maps the change in the volume of production in Indian industries across manufacturing, mining and energy sectors.

Power sector growth declined by 12.2% in October this year, against 10.8% rise last year, while capital goods production declined by 21.9% in October compared to 16.9% rise in the year-ago month.

Meanwhile, retail inflation surged 5.54% in November as consumer food price inflation has reached a 40-month high, to 10.01% last month from 7.89% in October, according to data released by the National Statistical Office. This significant rise has exceeded the general Consumer Price Index (CPI) inflation of 5.54%. These numbers are worrying, as the government mandated the Reserve bank of India to contain inflation in the range of 4%.

Furthermore, the data revealed that inflation in vegetables surged to 35.9% in November, as against 26.1% in October.

While, the retail prices of onions recorded all-time high of over Rs 100 per kg, reportedly, prices of 20 essential food items have been increasing steadily in the year. These include rice, wheat, flour, pulses, oil, tea, sugar, jaggery, vegetables, milk, potato and tomato.

These rises in inflation and negative growth are in sink with India's negative growth trajectory which has been decelerating since mid-2018. The real GDP growth fell from 5% in the second quarter (April-June) to 4.5% in July-September quarter this year.