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Demonetization effect shrugs off in November; IIP spikes to 5.7%

India’s Index of Industrial production (IIP) grew by 5.7 percent in the month of November of 2016. This
was a significant uptick against the October’s contraction of 3.4% in the November of 2015. The spike
can be attributed to significant rise in the production of capital goods.
India’s annual consumer price index (CPI) data showed lower then expectation easing. It came at 3.41%
in December. This is the lowest CPI number in last two years. Government data indicate that the sharp
decline in the food prices were the major reason behind this decline.
This data indicate that demonetization has not as much impact as estimated by different politicians and
economists. In October, the IIP contacted by 1.8% and now this spike shows that production firms have
shrug off the negative impacts of demonetization.
The Reserve Bank of India had kept the interest rate unchanged in its last meeting citing that inflation
target of 4% may be at risk due to crude price volatility, however today number outperformed the RBI’s
Many economists as well as Dala Street watcher were expecting that today’s IIP number will show the
negative impacts of PM Modi’s demonetization move, however the spike shows a different picture

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