Inflation stays flat, IIP touches 9-month high
Hopes of Reserve Bank cutting its rates remain bleak
New Delhi, Oct. 12: India’s annual consumer price inflation remained steady in September from the previous month, but hopes of a rate cut by the Reserve Bank of India remain bleak as it expects higher inflation in coming months.
India’s annual consumer inflation (CPI) in September rose to 3.28 per cent from a year earlier, the government data showed on Thursday.
Analysts polled by Reuters had expected September’s CPI inflation rate would edge up to 3.60 percent from August’s downwardly revised 3.28 percent.
Earlier this month, RBI left interest rates unchanged, after cutting the key rate by 25 basis points in August, while raising its retail inflation projection for October-March to a range of 4.2 to 4.6 percent, and lowered its economic growth estimates.
Analysts said the chances of a rate cut were bleak as higher sales during India’s long festival season that begins next week, coupled with higher petrol and diesel prices, could feed into broader prices.
“Aside from volatile food and fuel prices, core inflation is likely to accelerate,” said Shilan Shah, an economist at Capital Economics in Singapore. “There is also a risk that excessive liquidity in the banking sector could seep into inflation.”
Since August 1, retail petrol prices in Delhi have gone up 4.7 per cent and diesel 2.6 per cent despite a cut in taxes by the federal government.
Retail inflation has been steadily rising since June, when it eased to 1.46 per cent — its slowest pace since India started releasing such figures in January 2012, based on combined data for rural and urban consumers.
Separately, annual industrial output grew at a nine-month high of 4.3 per cent in August, the data showed. IIP was revised to 0.9 per cent year-on-year in July.
The Prime Minister, who faces crucial state elections in Gujarat and Himachal Pradesh in December, is under pressure to revive growth, which slipped to 5.7 percent in the April-June quarter. — Reuters