New Delhi: Retail inflation increased to 7% in August due to high food and fuel prices, which came as a type of double whammy for the Indian economy as factory output fell to a four-month low of 2.4%.
The Reserve Bank of India (RBI) will be under pressure to hike interest rates once again to control prices, which have remained over the comfort level for the eighth consecutive month, as the CPI inflation trend reverses a three-month downward trend.
CPI inflation climbed to 7 per cent from 6.71 per cent in July and 5.3 per cent in August 2021, official data released on Monday showed.
A sharp increase in cereals and vegetable prices owing to erratic monsoon impacting production was the main reason.
While the country was already facing double-digit wheat inflation due to unexpected heat wave pulling down the output, a lower area sown under paddy due to the shortfall in monsoon rainfall is expected to reduce the rice output. The twin effect of this means inflation in cereals will remain at elevated levels.
This is the second instance since RBI adopted the inflation targeting approach that the retail inflation has breached the upper tolerance limit of 6 per cent for eight consecutive months - the earlier instance was from April 2020 to November 2020.
Separately, the Index of Industrial Production (IIP) for July 2022 recorded a tepid year-on-year growth of 2.4 per cent, falling sharply from 12.7 per cent in June.
The manufacturing sector grew by 3.2 per cent (a four-month low) and the electricity sector by 2.3 per cent (a six-month low). Mining sector witnessed a contraction of 3.3 per cent in July 2022 after a gap of 16 months despite the coal output increasing by 11.4 per cent in the same period. GKNN