Retail inflation hits 8-month high of 7.3% on food prices

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NEW DELHI: Retail inflation accelerated to an 8-month high in September and crossed the 7%-mark as food prices hardened, dashing hopes of any interest rate cut by the RBI to bolster a faltering economy. Separate data showed industrial output contracted for the sixth month in a row in August but the pace of decline narrowed, indicating the pick-up in activity as the economy opened for business after the strict coronavirus-induced lockdown.

But the inflation numbers remained worrisome with food inflation hitting the double-digit mark in September.

Data released by the National Statistical Office (NSO) on Monday showed inflation, as measured by the Consumer Price Index (CPI), rose an annual 7.3% in September, compared to the 6.7% increase in August. Rural inflation was at 7.4%, while the rate in the urban areas was 7.3%. The Food Price Index rose to 10.7% in September, higher than August’s 9.1%, the data showed.

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“Barring March, retail inflation was more than 6% in 10 months. Food inflation spiked to double digit (10.7%) after April,” said Sunil Sinha, principal economist at India Ratings. “On a quarterly basis, second quarter FY21 retail inflation at 6.95% was 24-quarter high and in the last three consecutive quarters it was in excess of 6%. India Ratings believes the RBI may pause on policy rate in the remainder of FY21 but will continue to take other measures to make financial markets function smoothly,” said Sinha.