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Even as the Narendra Modi government tries to prop up a sagging economy, the headwinds are rising with the latest bad news coming today on the wholesale price and external trade fronts.
Headline Wholesale Price Index-based inflation rose, even while remaining in the negative, at -3.81 per cent, in October on the back of costlier pulses and vegetables, while exports continued to fall for the eleventh consecutive month as global demand remained weak.
The economic outlook is far from stable with the expansion in factory output growth slowing down yet again in September and the Consumer Price Index (CPI) rising for the third straight month. All these macroeconomic data will be used by the Reserve Bank of India for the monetary policy review on December 1. “We do expect WPI inflation to continue to remain negative in the coming months and will turn positive when global conditions relating to commodities change. The RBI policy, however, will continue to be driven by CPI inflation which is within its current range of 6 per cent,” CARE Ratings said. The fall in imports in October was sharper than the decline in exports, narrowing the trade deficit to $9.7 billion compared with $13.57 billion in the same month last year. This was the only silver lining, as a low trade deficit is essential to keep the current account deficit in check and maintain a robust balance of payment.
Overall headline inflation for food articles rose by 2.44 per cent in October with prices of vegetables rising by 2.56 per cent in the month.
The sharpest rise in WPI inflation amongst food articles was that of onions, which jumped 85.66 per cent. While the prices of pulses rose 52.98 per cent, that of potatoes contracted by 58.95 per cent in October.
Exports of goods slid for the eleventh consecutive month falling 17.53 per cent to $21.35 billion in October 2015 compared to the same month last year, according to quick estimates released by the Commerce Ministry.
The decline was across sectors, including engineering, gems and jewellery, leather and chemicals. However, sectors such as pharmaceuticals, readymade garments, carpets and ceramics posted growth in exports.
“Going by the current trend and factoring in little improvement, reaching $300 billion in the current fiscal seems to be a remote possibility,” pointed out SC Ralhan, President, FIEO.
Imports fell 21.15 per cent to $31.12 billion during the month, with sharp decline in gold, silver, petroleum products, project goods and coal.
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