At their latest meeting in December, Fed officials revised up their forecasts for economic growth this year and lowered their forecast for the unemployment rate, citing a short-term boost from the tax cuts enacted after they met. The figures for rural and urban areas in December were 5.08% and 4.71%.
Excluding volatile food and fuel components, "core" CPI rose 0.3% last month, the biggest jump since January 2017, on rising costs for shelter and medical care. Housing inflation increased to 8.25 per cent from 7.36 per cent in November 2017.
"However, the central bank could still stay put in the near term, so as to wait and see if the inflationary pressures are temporary or permanent in nature".
"Manufacturing growth is expected to remain robust in December 2017, benefiting from a favourable base effect, as well as the robust expansion displayed by sectors such as automobiles".
Among the IIP's nine broad categories, manufacturing sector, which accounts for 77.63 per cent of IIP, grew 10.2 per cent in November from 4 per cent a year ago.
Industrial production was probably 4.4 per cent higher in November than a year earlier, after increasing 2.2 per cent in October, the poll also showed. Output of "infrastructure or construction goods" increased by 13.5 per cent and that of capital goods by 9.4 per cent.
The strengthening domestic demand was underscored by other data Friday showing retail sales rising at a solid pace in December.
"In line with our expectations, CPI inflation in Dec '17 has increased to a 17-month high of 5.21 per ce't, compared to 4.88 per cent in Nov '17". Simultaneously, the CPI inflation number continued to be elevated at 5.2%.
The uptick in retail inflation and continuing concerns related to the government's fiscal deficit targets for FY18 and FY19 are likely to keep bond yields elevated in the ongoing month, said Aditi Nayar, principal economist at ICRA. Last month's increase in retail sales and the sharp upward revision to November data bolstered economists' expectations of an acceleration in consumer spending in the fourth quarter.