Retail inflation likely fell to record low of 4.5 per cent in November, shows poll

The country's consumer (or CPI-based) inflation likely fell to a record low in November, dragged down by falling food and fuel prices, while growth in core industries nudged factory output up in October, a Reuters poll showed.

The latest survey of 36 economists forecast that the country's retail inflation cooled from October's 5.52 per cent to an annual rate of 4.50 per cent, which would be the lowest since the government started releasing the data in 2012.

The government is set to release official retail inflation data on Friday (December 12).

Wholesale price (or WPI-based) inflation was forecast to slow to 1.41 per cent in November from 1.77 per cent in October, making a new five-year low. Official data for the same will be released on December 15.

"Continued steep declines in food and fuel prices, as well as subdued core pressures, mean that consumer price inflation is likely to have dropped to a record low in November," wrote Shilan Shah, Capital Economics' India economist, in a note.

While expecting some acceleration in inflation during coming months, partly due to the unwinding of a favourable base effect, the Reserve Bank of India (RBI) raised hopes at its fifth bi-monthly monetary policy review on Dec 2 that it would cut interest rates once it became sure that inflationary pressures were waning.

The poll by Reuters also forecast that production at domestic factories, mines and utilities rose at an annual rate of 2.80 per cent in October compared to 2.50 per cent in September.

Data last week showed annual infrastructure output, which accounts for more than a third of overall factory production, accelerated to a four-month high of 6.3 per cent in October.

The rising trend in industrial production will probably continue, according to a private survey earlier in December, which showed strong demand meant factory activity expanded at its fastest pace in nearly two years in November.

The positive data suggests the economy may be gaining momentum after losing some steam in the July-September quarter of the current financial year.

"A recovery is certainly underway. Its sustainability depends critically on the continued efforts by the government to resolve the issues surrounding stalled projects," said Rupa Rege Nitsure, chief economist at Bank of Baroda.

(Polling by Shaloo Shrivastava) - Reuters