India's retail inflation rises to 5-month high of 7.41%, industrial activity contracts

 India's retail inflation rises to 5-month high of 7.41%, industrial activity contracts

A survey of 47 economists suggested that inflation rose to 7.30% annually in September.

• Food inflation, which accounts for almost half of the CPI basket, rose to 8.60% in September 2022 as against 7.62 per cent in August

Driven by rising food prices, India's retail inflation rose to 7.41% in September, the fastest pace in five months, data released by the National Statistical Office (NSO) showed on Wednesday. The number remained well above the upper tolerance band of the Reserve Bank of India (RBI) for the ninth consecutive month. This is likely to put pressure on the RBI, which has raised its key repo rate by 190 basis points in four moves this year to accelerate its interest rate hikes.

Food inflation, which accounts for almost half of the CPI basket, rose to 8.60% in September 2022, compared to 7.62 per cent in August.

Meanwhile, industrial growth as measured by the Index of Industrial Production (IIP) declined by 0.8 per cent in August from 2.4 per cent in July, according to data released by the National Statistical Office (NSO).

Mining production decreased by 3.9% during August, while electricity generation increased by 1.4%.

In April 2020, industrial production declined by 57.3% due to a decline in economic activity in the wake of the lockdown imposed to contain the spread of the coronavirus infection.

More than 10% depreciation of India's rupee against the dollar this year has made imports expensive for consumers and businesses.

The data shows that fuel and electricity prices increased by 11.44% year-on-year in the previous month, compared to a 10.78% increase in the previous month.

After the data was released three economists said core inflation, excluding volatile food and energy prices, was estimated at 6.07%-6.1% in September, compared to the 5.84%-5.90% estimate in August.

IMF cuts global growth forecast for 2023 citing inflation, war and war

A Reuters poll of economists suggested consumer price index-based inflation to come in at 7.30% in August from 7.00%.

Due to uncertain rainfall and supply shocks from Russia's invasion of Ukraine, prices of daily consumables such as grains and vegetables, the biggest category in the inflation basket, have climbed over the past two years.

The Indian government has introduced measures to pacify local prices, including some export restrictions on rice, to control inflation. But consumer prices have remained volatile and have remained above the RBI's upper tolerance limit this year.

A weak currency is not helping either. Indian Rupee is going to new low this month.

Meanwhile, the head of the IMF's World Economic Studies Division said at a news conference on Tuesday, "We expect inflation to return to the inflation tolerance band of 4 percent in the fiscal year 2023-2024, and additional monetary tightening is going to ensure that." Yes. It happens."