There is no good news for the Indian economy yet, as inflation surged to double digits, rupee again depreciated, and equity markets fell.
As per the data, inflation in October stood at 10.09 per cent as compared to 9.84 per cent during September. Driven by high prices of vegetables and fruits, inflation re-entered double digits after seven months. Consumer price index (CPI)-based inflation remained in double digits for several months until March this year before it declined to 9.39 per cent in April.
During October, vegetables and fruits drained most from public’s pocket as prices of vegetables rose by 45.67 per cent as compared to 34.93 per cent in the previous month and fruits were dearer by 12.84 per cent. Inflation in the food and beverages segment also rose marginally to 12.56 per cent against 11.44 per cent in September.
Even after the Reserve Bank of India hiked short-term lending rate (repo rate) by 0.25 per cent recently, inflation remains unrestrained. Making the matter worse, domestic car sales declined by 3.88 per cent in October, snapping a two-month streak of positive growth.
According to the Society of Indian Automobile Manufacturers (Siam) figures released on Tuesday domestic passenger car sales slid to 1,63,199 units as against 1,69,788 in the same month last year. Car sales in the country declined for a record nine months till July this year but grew in the months of August and September and now is again is falling under pressure.
While most of the car makers were extremely confident of robust demand during the festive season, despite that the fall in demand clearly indicate auto experts say that the public feels insecure and worried about the overall fundamentals of the economy.
The immediate impact of the shaky fundamentals has been seen on the Indian equity and forex markets. Falling for the sixth consecutive day, Sensex has lost over 1,000 points from its all-time high of 21,293.88 on November 1. On Tuesday, the benchmark index slid by 209.05 points to 20,281.91 while Nifty fell by 60.75 points and finally closed at 6,018.05.
As per experts, indices fell to their one-month low due to currency depreciation and heavy profit booking seen from investors and institutions. Out of the 30 shares comprising Sensex, 26 stocks closed under pressure. Similarly on Nifty, 40 shares out of the 50 fell. Sector-wise, 12 out of the 13 indices of BSE ended the session with losses.
Metal and power indices lead the fall after losing 1.8 per cent and 1.75 per cent respectively. Auto and bank indices also fell by 1.62 per cent each. While stock markets tumbled, rupee lost 209 paise in five straight sessions. During the session, rupee slid to its two-month low of Rs 63.83 per dollar but finally ended at Rs 63.71 per dollar, down by 47 paise. Currency has again tumbled back to its lowest level since closing at Rs 63.84 per dollar on September 10.
As per forex experts, currency came under pressure due to heavy dollar demand from importers and weak equity markets. A firm dollar overseas also weighed on the rupee as the dollar index, consisting of six major global rivals, was up by 0.28 per cent. However, amid all these signs of tumbling fundamentals, industrial production managed to show slight growth. After remaining flat in August, industrial production recovered as the output grew by two per cent in September, mainly on account of better performance by power and mining sectors.
Power generation showed a healthy growth of 12.9 per cent during September. The mining sector grew by 3.3 per cent in while the manufacturing sector grew by marginally by 0. 6 per cent in September. On the other hand, capital goods production, a barometer of demand, showed a decline of 6.8 per cent in the month. The consumer durables segment contracted by 10.8 per cent in September while the non durable sector rose to 11.3 per cent.