Prof K Nageshwar: Food Inflation Over 10 Percent

Daniel Fowler
October 13, 2020

The inflation based on the Consumer Price Index (CPI) stood at 6.69 percent in August.

On Monday, data released by the Ministry of Statistics and Programme Implementation showed that retail inflation rose to an eight-month high of 7.34 percent in September when compared to 6.69 percent in August. Whereas, the same was 6.69 percent in the month of August.

"Amid the unpalatable headline and food inflation figures, the relatively stable core inflation in the past three months offers some relief, keeping the hopes of a February 2021 rate cut alive", said Aditi Nayar, principal economist at ICRA. This was the sixth consecutive month that the inflation rate remained above the Reserve Bank of India's (RBI's) comfort zone of 6 per cent.

Food price inflation for rural areas stood at 10.60 per cent in September 2020, up from 9.11 per cent in August. Since then, the consumer prices had a downward effect from a year ago, the agency added. The government has instructed MPC to tame retail inflation based on CPI at 4 percent (+,- 2 percent).

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The Index of Industrial Production (IIP) has shown sequential improvement, but cumulatively, it has contracted by 25 per cent for April-August against a growth of 2.4 per cent in the same period a year ago.

Later, the RBI Governor had informed that the central bank has made a decision to keep the key policy repo rate unchanged at 4 per cent. This is the highest level of inflation recorded since January, according to NDTV.

On a sequential basis, the index for nonalcohol beverages fell 0.8%, its largest monthly decline since December 2010, the Bureau said.

Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research, said inflation print has come contrary to market expectations that unlocking of the economy and easing of supply constraints, food prices will moderate over next few months. Manufacturing sector, which has a weight of 77.6 per cent in IIP, contracted 8.6 per cent in August, an improvement from 11.6 per cent contraction in July.

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