The Consumer Price Index, which measures inflation in India, dropped to 3.41% in December 2016 from 3.63% the previous month. This is the fifth consecutive month that the CPI has declined. The 3.63% figure from November 2016 marked a two-year low in retail inflation. It stood at 5.61% in December 2015, according to data from the Central Statistics Office.

The cost of vegetables dropped by 14.5% year on year, while that of pulses and related products fell by 1.57%. Overall, the cost of food and beverages rose by 1.98%.

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Moreover, the Index for Industrial Production stood at 175.8 in November 2016 as compared to 178 the previous month. Factory output saw a significant 5.7% growth for the month, year on year, according to the Central Statistics Office.

The IIP for the manufacturing sector saw 5.5% year-on-year growth. Of the 22 industry groups in this sector, 16 saw positive growth. The radio, TV and communication equipment and apparatus group recorded the highest positive growth of 32.2%, followed by 23.2% growth in both the electrical machinery and apparatus group as well as the motor vehicles, trailers and semi-trailers group.

There was 3.9% growth in the output of the mining sector and that of 8.9% in the electricity sector, year on year.

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Analysts had attributed the fall in retail inflation to demonetisation, saying it had affected demand and people’s purchasing power. Consumer spending, which makes up 55% of India’s economy, was hit significantly after the currency ban because more than 90% of citizens prefer to pay by cash, experts had said.

The drop in retail inflation followed the Monetary Policy Committee’s surprise move on December 7 to keep the Reserve Bank of India’s repo rate unchanged. The key rate, which helps control inflation in the country, was maintained at 6.25% under the liquidity assessment facility, the RBI had said.