Inflation spikes again to seven per cent

New Delhi: Staying above the central bank’s comfort zone of 2-6 per cent for the eighth consecutive month, India’s retail inflation–as measured by the Consumer Price Index (CPI)–surged to 7 per cent in August due to higher food prices, while the factory output, measured on the Index of Indus-trial Production (IIP), witnessed a growth of 2.4 per cent in July—still at a four-month low, two separate data sets from the Ministry of Statistics & Programme Implemen-tation (MoSPI) showed on Monday.

The CPI inflation was lower at 6.71 per cent in July. Despite the government’s move to restrict wheat flour exports towards the end of August, inflation soared in August, adding pressure on the central bank to raise interest rates more aggressively in the coming months to tackle elevated inflation.

As per the data, food inflation, which accounts for nearly half the CPI basket, soared 7.62 per cent in August against 6.75 per in July.  The inflation rate for vegetables grew by 13.23 per cent in August while in pulses, the inflation rate came in at 2.52 per cent. Similarly, fuel and light inflation declined to 10.78 per cent in contrast to 11.76 per cent in July.

“Inflation levels in the economy remain elevated despite a considerable reduction in crude oil price from its recent highs. Rise in food prices, domestic fuel price level and pressure on the Indian currency continue to pose a near term threat on inflation trajectory,” said Vivek Rathi, director-research, Knight Frank India.

Meanwhile, industrial output growth tumbled to 2.4 per cent in July as compared to 12.3 per in June. “The IIP had risen 11.5 per cent in July 2021. The industrial growth so far in the fiscal year 2022-23 (April-July) has risen 10.0 per cent, compared to a spike of 33.9 per cent in the corresponding period a year ago,” the MoSPI data showed. The IIP growth in July was led by mainly manufacturing and electricity sectors.