India's consumer price inflation accelerated to 5.6 percent in December, the Statistics Ministry said Tuesday, 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, slightly above the 5.5 percent rise foreseen by economists in a Bloomberg survey.
It marked the fifth month in a row that inflation had gained pace, with consumer prices increasing 5.4 percent year-on-year in November and 5 percent 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 percent.
"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 percent in November compared with the same month a year earlier, figures released Tuesday showed. It comes after factory output expanded 9.8 percent 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 percent by January 2016 and to four percent for the 2016/17 financial year.
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