Retail inflation rose to a five-month high of 7.41 percent in September mainly due to costlier food items, reason enough for the Reserve Bank of India (RBI) to continue with its rate hike cycles it has resorted to since May 2022. Inflation in the food basket rose to 8.60 percent in September from 7.62 percent in August.

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It is for the ninth month in a row that retail inflation has remained above the Reserve Bank of India's upper tolerance level of 6 percent. Official data released by National Statistical Office (NSO) on Wednesday showed that the retail inflation based on Consumer Price Index (CPI) was at 7.41 percent in September as against 7 percent in August.

In the year-ago month, it was at a comfortable level of 4.35 percent. The central government has mandated RBI to ensure that retail inflation remains in the range of 2-6 percent.

India's industrial production slipped to an 18-month low, contracting by 0.8 percent in August, mainly due to a decline in output of the manufacturing and mining sectors, according to official data released. The data showed that the previous low in industrial output growth was a contraction of 3.2 percent in February 2021.

Factory output, measured in terms of the Index of Industrial Production (IIP), had expanded by 13 percent in August 2021. The IIP grew by 2.2 percent in July this year.

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The manufacturing sector shrank by 0.7 percent in August 2022 compared to the 11.1 percent growth recorded in the year-ago period, as per the data released by the Statistics and Programme Implementation Ministry.

The power sector showed a growth of 1.4 percent against a 16 percent rise a year ago. The mining sector witnessed a contraction of 3.9 percent in August 2022, whereas there was a growth of 23.3 percent in the year-ago period. During April-August this year, IIP rose 7.7 percent against 29 percent growth in the same period a year ago.

Capital goods output, which is a barometer of investments, rose five percent in August 2022 compared to 20 percent growth in the year-ago month. The consumer durables segment declined 2.5 percent from 11.1 percent growth a year ago.

The primary goods segment, which accounts for nearly 34 percent of the index, expanded 1.7 percent in August compared to 16.9 percent growth in the year-ago period.

The ministry said the growth rates over the corresponding period of the previous year are to be interpreted, considering the unusual circumstances on account of the COVID-19 pandemic since March 2020.

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The Reserve Bank of India Act mandates the central bank to show up with a report to the government as to why it failed to contain inflation within the targeted band. One of the RBI's main functions is to contain inflation at 4 percent with a bias of 2 percent on either side.

In September, RBI Governor Shaktikanta Das said acute imported inflation pressures felt at the beginning of this fiscal year have eased but it still remains elevated across food and energy items.

As per the government data, the retail inflation in 'cereals and products', 'milk and products', vegetables, 'pulses and products' and spices were higher at 11.53 percent, 7.13 percent, 18.05 percent and 3.05 percent and 16.88 percent respectively in September, higher than the preceding month.

While, the higher prices of 'cereals and products' exhibit the imported inflation pressure due to the ongoing Russia-Ukraine war impacting supplies globally, the higher vegetable prices can be attributed to torrential rains damaging crops as well as impacting transportation. Protein-rich eggs continued to show deflation at (-)1.79 percent in September, albeit at a slower pace than (-) 4.57 percent in August.

The rate of price rise in fruits was slower at 5.68 percent as against 7.39 percent in the previous month. For 'fuel and light' category, the retail inflation remained above 10 percent.

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First Published:Oct 12, 2022 11:49 PM IST