Photographer: Dhiraj Singh/Bloomberg

India Inflation Eases More Than Estimated Before Modi’s Budget

Updated on

India’s consumer inflation eased to a two-year low as demand slumped in the first full month of Prime Minister Narendra Modi’s cash clampdown, adding pressure for stimulus measures in the budget next month.

Key Points

  • Consumer prices rose 3.41 percent in December from a year earlier, the Statistics Ministry said in a statement in New Delhi on Thursday
  • That’s slower than the 3.51 percent median estimate in a Bloomberg survey of 34 economists and the November reading of 3.63 percent
  • November industrial production grew fastest in more than a year, rising 5.7 percent from a year earlier after falling 1.8 percent in October; economists had predicted a 1.5 percent gain

Big Picture

The data is in line with other indicators that point to slowing economic activity after Modi on Nov. 8 canceled 86 percent of currency in circulation. While the Statistics Office sought more data to study the impact of demonetization on the $2 trillion economy, evidence of a deeper-than-expected slowdown will add pressure on Modi to include measures to stimulate consumption in his budget due Feb. 1. Reserve Bank of India Governor Urjit Patel will review borrowing costs a week later.

Economist Takeaways

"Inflation may have bottomed out with maybe one more month of low data," said Indranil Pan, chief economist at IDFC Ltd. "As for the factory output numbers, they’re the biggest surprise and go beyond my understanding considering auto sales are down and exports far from robust."


  • The consumer food price inflation rose 1.37 percent
  • Food and beverage prices rose 1.98 percent
  • Fuel and lighting rose 3.77 percent
  • Clothing and footwear rose 4.88 percent
  • Mining, manufacturing and electricity sectors grew 3.9 percent, 5.5 percent and 8.9 percent in November
  • Wholesale price inflation data is expected on Jan. 16

— With assistance by Iain Marlow, and Manish Modi

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