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Sept inflation at 7-month high,RBI unlikely to go soft on rates

The RBI,which will unveil the second quarter review of monetary policy on October 29,is unlikely to soften its stance on key rates.

Written by ENS Economic Bureau | New Delhi | Published: October 15, 2013 1:22:05 am

Headline inflation rose to a seven-month high at 6.46 per cent in September,driven by high prices of cereals and vegetables including onions.

The RBI,which will unveil the second quarter review of monetary policy on October 29,is unlikely to soften its stance on key rates.

Reserve Bank of India Governor Raghuram Rajan had raised the repo rate by 25 basis points at his maiden monetary policy announcement on September 20,a signal that the central bank has its sights fixed on inflation.

According to the data released by the ministry of commerce and industry,the headline inflation — as measured by the wholesale price index (WPI) — was 6.10 per cent in August while it was 8.07 per cent during September 2012.

The index of primary articles,which carries a weight of over 20 per cent,rose because of sharp increase in price of food articles.

Food inflation soared 18.40 per cent with onion prices jumping over 323 per cent during the month compared to a decline of over 24 per cent during the corresponding year-ago period.

Rice became dearer18.76 per cent during the month compared to 12.58 per cent in the same period a year-ago.

Reacting to the inflation numbers,while Montek Singh Ahluwalia,planning commission deputy chairman,said it was at an “uncomfortable” level,food minister KV Thomas said cost of production has increased due to NREGA wages,besides higher MSP.

However,India Inc pitched for a rate cut,arguing that it is important to shore up the investor sentiments,which have been adversely impacted by high interest rates. The industry urged the central bank to not get influenced by the rising inflation as the arrival of kharif crop during the month would provide some relief in food prices.

“While there has been a further spike in the inflation rate,we have seen that the improvement in industrial production numbers has also not sustained with IIP in August 2013 remaining largely flat at 0.6 per cent. With inflation firming up and industrial growth failing to take off,the central bank will once again find itself in a difficult situation in terms of calibrating the monetary policy,” said Didar Singh,secretary general,Ficci.

The index for non-food articles rose 2 per cent during the month due to higher price of guar seed,raw silk,copra,cotton seed,raw cotton among others. Fuel prices were up by over 10 per cent,though the rise was at a slower pace compared to 12 per cent during the same period a year ago.

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