The Consumer Price Index (CPI) inflation accelerated to 3.36 per cent in August on the back of a surge in food prices during the period, the government said on Tuesday. The retail inflation in August rose from 2.36% in July, the Ministry of Statistics and Programme Implementation said. The retail inflation data is higher than what was predicted by a Reuters poll of 40 economists. It has hit a four-month high, but remains below the RBI’s mid-term target of 4 per cent.
The consumer prices rose in the month due to a rise in the food inflation and rural inflation, the data showed. Earlier today, Reuters had forecast that unfavourable weather conditions and the shortage in the supply of vegetables in August would push up the index for the month.
The higher inflation will likely ease the pressure on the central bank to cut the interest rates in its decision scheduled on October 4. Earlier, analysts had also predicted that housing inflation and higher domestic fuel prices to extend in the month of August.
In the last month, July, the retail inflation was chiefly driven by hardening of prices in sugar and confectionery items, pan, tobacco, and intoxicants. The RBI had then cut interest rates on the subdued economic outlook, which had hit a three-year low.
Meanwhile, an RBI note said that the farm loan waiver by seven states amounting to Rs 88,000 crore was likely to push inflation on a permanent basis by 0.2 per cent.
On the other hand, the growth in industrial production (IIP) for the month of July recovered to 1.2 per cent from a fall of 0.1 per cent in the preceding month of June. Earlier today, DBS Research had predicted that the core industries output would improve due to broad destocking exercise in June, but would remain weaker than last year’s 4.6 per cent. The trend growth in Apr-Jul was 1.8 per cent this year, DBS added.