Wholesale prices in India grew by 11.89 per cent in the year till the end of June, the fastest rate since the measure began in 1995, inflation has tripled over the last six months, driven by the soaring cost of food and fuel. Figures also showed that the output of India’s factories grew by its slowest rate in six years.
Industrial output rose 3.8 per cent in May, compared to the same month in 2007, a sharp drop on April’s 6.2 per cent growth.” The industrial output numbers… are a reflection of manufacturer’s anticipation of a slowdown in consumer spending as high inflation bites into incomes and some scale-back of fresh production plans,” Shuchita Mehta, an economist with Standard Chartered Bank, said.
The Reserve Bank of India has been increasing interest rates to try and dampen inflatio, Last month, it increased its main lending rate twice in two weeks to 8.5 per cent. But analysts had predicted that higher interest rates could cause economic growth to slow further. Economists suggest the economy is unlikely to grow between 8 and 8.5 per cent this year,as the government had predicted.