Declining imports, indicating a well-entrenched slowdown, and inflation likely to raise its head in coming months aided by higher milk and medicine prices has put the government on its toes, with Prime Minister Narendra Modi expected to discuss measures to pump prime the economy in a full Union Cabinet meeting later this week.

The meeting will be held after the crucial GST Council on Wednesday, which of late, has shed the idea of any hike in a levy on goods and services impacting the common man.

Retail inflation, which has already reached 5.54% in November, is expected to go up further in December and January because of the latest hike in milk prices by about 5% and drug price regulator allowing a one-time increase of about 50% in key antibiotics, certain vitamins and anti-allergic drugs among others.

Milk and medicines have significant weight on the consumer price index, which is already up due to skyrocketing onion and other food prices. A back-of-the-envelop calculation shows, the headline CPI inflation could have been less than 3.5% if vegetable prices had not hit the roof. In CPI basket food articles have the highest weight of over 45%.