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Costlier onion, other food items push headline inflation to 6.1% in August

Sep 17 2013, 21:23 IST
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Headline inflation rose at the fastest pace for six months in August, driven by an 18 per cent jump in food price. Headline inflation rose at the fastest pace for six months in August, driven by an 18 per cent jump in food price.
SummaryThe inflation was at 5.79 per cent in July and 8.01 per cent in August, 2012.

primarily led by the rising food and fuel prices. The impact of food on inflation is expected to fade off in the subsequent months, easing price pressure.

Weak domestic demand will further help in offsetting the impact of high global crude oil prices and weak rupee. However, inflation is likely to hover in the 5.5-6.2 percent range in H2."

R. SIVAKUMAR, HEAD OF FIXED INCOME, AXIS MUTUAL FUND, MUMBAI

"From a policy-making stand point, we expect RBI to be more objective as manufacturing sector inflation still seems to be contained and they shouldn't react to the higher food inflation number.

"The RBI would be focusing on the strengthening of the currency on the back of lower geopolitical risks with the Syria situation controlled and potentially the Fed tapering easing off with the new expected chair."

DEVEN CHOKSEY, MANAGING DIRECTOR, KR CHOKSEY SECURITIES, MUMBAI

"Core inflation has fallen but food inflation is 18.18 percent and that is a problem. Market is interested in knowing that whether rates would come down, but I think it will be a courageous call.

"I am more confident now that RBI would be able to take care of situation but expecting a CRR cut is better."

SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL, MUMBAI

"While rising primary index clearly reflects higher vegetable and onion prices, the fuel inflation have not captured the full impact of recent currency weakness.

"However, consistent moderation in the core inflation indicates the demand pool factors are still subdued. Hence with lower core inflation, expectation of an easing food prices and recent recovery in the rupee would impact the headline figures in a positive way in the coming months.

However, the expected rise in domestic fuel index would be considered as a near term threat."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"Headline inflation was expected to spike in August mainly on account of the monsoon effect on perishables like onions and the consistent fuel price adjustment impacting transportation costs. India definitely has entered a stagflationary phase".

A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI:

"Obviously this leaves RBI in a difficult situation because there is evidence that weak demand is having an effect on pricing power but still overall inflation is quite high on the retail side also. This means inflation expectation will continue to rule high.

"So the issue is current overnight rate at 10.25 percent is too high but also returning to an overnight rate of 7.25 percent may not be

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