By Sharad Chandra Shukla
National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) released the All India Consumer Price Index (CPI) on Base 2012=100. As expected CPI increased by 7.4% in the month of September 22. This was primarily due to food inflation. Food inflation increased to 8.6% led by all food commodities like cereals, pulses, vegetables and other food items. Higher vegetable prices up by 2.5%, Cereals prices up 2% and Pulses prices up 1.1% compared to previous month were the major contributors to higher inflation. Fuel & Light inflation stood at 10.4%, the only comfort being that the Govt. is not allowing the retail fuel prices to increase to protect the retail consumer.
The additional burden is being borne by the state, otherwise CPI number would have been higher. Unseasonal rains in the month of October 22 have damaged crops in the northern part of India. So the belief of inflation coming down soon may not be real. With the geopolitical situation worsening the global inflation will get imported in the domestic economy. Another surprise from this month’s numbers was on the industrial growth front. The IIP decreased by 0.8% in the month of August 22. Electricity output decelerated further to a lower increase of 1.4% in the month of August 22 indicating slowdown in the industrial production.
The silver lining is that as per CMIE the private sector capital expenditure plans are picking up. Though the benefit of that comes with a lag. We should note that geopolitical situations and uncertainty in global financial markets impact the domestic sector also. The IMF in its recent report mentioned a global recession in a few countries. Global monetary conditions, inflationary pressure, and the Ukraine conflict will impact our economy. Global economic slowdown as mentioned by the IMF can be attributed to higher interest rates and higher energy cost. OPEC has also decided to cut down oil output looking at the global slowdown scenario thus not allowing the oil prices to ease.
This year’s monsoon has been erratic and has caused flooding in some parts of the country. Key products like paddy and pulses growing areas in northern and eastern India will bear the impact on farm output. Global trade will witness a sharp slowdown in advanced economies, Indian exports growth will thus weaken. An already visible slowdown, manufacturing output coming down by 0.7%, global monetary conditions, geo-political tension, uncertainty on oil prices will thwart the domestic recovery.
(Sharad Chandra Shukla is the director of Mehta Equities Ltd. The views expressed are the author’s own and do not reflect the official position or policy of FinancialExpress.com.)