New Delhi : Two data released on Thursday provide reason for optimism about the economy. India’s retail inflation rate fell to a 12-month low of 5.7% in December, staying below the 6% upper limit of the central bank’s target range for the second straight month. Separate government data showed industrial production expanded a strong 7.1% in November from a year earlier, a sharp rebound from October’s 4.2% contraction. Although brilliant, the inherent volatility in this reading should caution us against being prematurely happy. Nevertheless, it is reassuring that other gauges such as the purchasing managers’ index are also showing an upward trend.
Furthermore, if retail inflation stays within the central bank’s 2-6% band without the threat of another flare-up, it could signal the end of its current rate-hike cycle. This will help Indian businesses weather global headwinds as credit conditions tighten in the West and much of the world is losing economic momentum. To be sure, India is expected to do much better in 2023-24. The World Bank forecasts 6.6% real growth for the Indian economy in the next fiscal year, although global output is expected to grow only 1.7% in 2023.
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