Retail inflation rises to 7.41 pc in September, above RBI tolerance level of 6 pc for ninth month in a row

Tribune News Service

New Delhi, October 12

The stock markets and the rupee will come under pressure when markets reopen on Thursday after the Government announced worse-than-expected inflation numbers for the month of September and 0.8 per cent contraction in industrial output, according to two sets of official data released on Wednesday.

Retail inflation rate rose to 7.41 per cent in September as against 7 per cent in August and 4.35 per cent in September last year. Worse, rural areas continue to suffer from a higher inflation rate of 7.56 per cent as against 7.27 per cent in urban areas. This is the ninth month in a row that retail inflation has hovered over the RBI’s tolerance level of six per cent.

Inflation in the food basket rose to 8.60 per cent in September this year from 7.62 per cent in August. The RBI this month is slated to submit a report to the Centre detailing its inability to contain inflation at 4 per cent with a bias of 2 per cent on either side.

“The CPI data has come up worse than expected. Not only that, IIP has contracted. This would put pressure on the RBI to hike rates further especially in light of the falling rupee. We could expect pessimism and sell-off pressure from FIIs tomorrow,” said analyst Sonam Srivastava with Wright Research.

“The US Federal Open Market Committee (FOMC) Meeting Minutes today and the US inflation data on Thursday would make the situation grim with European banks already in trouble. Another 75 bps hike by the US Fed would be catastrophic and we are hoping that it does not come to that. In case inflation cools off the response would be positive and we can expect a global rebound,” she added.

Reacting to the numbers, Congress leader Jairam Ramesh said, “Government data shows consumer price index in September saw highest rate of increase in five months and retail food price inflation was 8.6 per cent. But does the PM care? FM went to a Chennai market that made for nice visuals but price rise continues unabated.”

The Index of Industrial Production’s contraction by 0.7 per cent in August follows a rise of mere 2.4 per cent in July. Mining output contracted by 3.9 per cent and power generation increased 1.4 per cent during August.