Inflation and exports data released on Monday raised hopes of a revival in investments and growth. Declining for the fifth straight month, the pace of wholesale inflation dropped to a six-year low of 0 per cent in November.
Exports growth turned positive again – at 7.27 per cent – in November raising the hope that the $340-billion target for the current fiscal will be met.
Though the trade deficit widened to 18-month high of $16.86 billion, the surge was in part due to a 40-per cent jump in import of machinery and transport equipment over October, signally a possible revival in investments.
The rupee closed at an over 10-month low of Rs 62.94 to a dollar, which will make India’s exports relatively more competitive.
India grew at sub-5 per cent over the last two years. Growth recovered to 5.7 per cent during April-June, before slipping again to 5.3 per cent in the July-September quarter.
The inflation data reflects the falling cost of production in the economy, largely on the back of the sharp contraction in global prices of crude and commodities. It also reflects moderating food prices.
The inflation data, however, shows a bigger drop than the actual decline in prices owing to the favourable statistical illusion of a high base: Wholesale inflation growth in November 2013 was 7.5 per cent.
Wholesale food inflation was down to 0.6 per cent against 19.7 per cent in November 2013 with prices of cereals, rice, wheat, vegetables and onions falling. However, potatoes and milk continued to show high inflation. While potato prices grew at the rate of 34 per cent, the rate of rise in milk prices was 10 per cent. Rice and pulses too rose, but at slower pace of 5.6 per cent and 4.4 per cent.
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