Double whammy for govt: inflation up at 11.24%, IIP contracts

In a double whammy for the government, retail inflation soared to a nine-month high of 11.24 per cent and factory output shrank 1.8 per cent, developments that may prompt the Reserve Bank to further increase a key interest rate next week.
Official data released today showed inflation as measured by the consumer price index (CPI) crossing the 11 per cent mark in November on account of costlier vegetables and fruits such as onions and tomatoes.
The Index of Industrial Production (IIP) contracted in October after three months, mainly due to poor performances in manufacturing, mining and consumer durables.
Commenting on inflation, RBI Governor Raghuram Rajan said, "I think monetary policy also has a role to play in trying to balance demand and supply. Again, as I said, we are aware of the weak economy but we also have to take into account inflationary pressure."

The RBI, scheduled to review the monetary policy on December 18, hiked the key lending rate by 0.25 per cent in each of it previous two policy reviews to contain inflation.
Before the data was released, the rupee closed 58 paise lower at 61.83 against the dollar while the 30-share benchmark Sensex plunged 246 points to close below the 21,000 level.

Persistently high inflation was touted as one of the main reasons for the defeat of the Congress party in the recently concluded assembly elections in the key states of Delhi, Madhya Pradesh, Chhattisgarh and Rajasthan.
In November, vegetable prices rose 61.6 per cent from a year earlier, compared with a 45.67 per cent increase in October. Fruits were 15 per cent costlier.

The CPI data showed pulses were dearer by 1.2 per cent, cereal prices by 12.07 per cent and milk products by 9.06 per cent last month.