India's wholesale price based inflation surged to 6.1 percent in August, the sharpest pace in six months, driven by 245 percent jump in onion prices, making it difficult for the central bank to cut rates in the policy review due later this week.
According to official data released Monday, the headline inflation, measured in terms of the Wholesale Price Index (WPI), accelerated to 6.1 percent in August as against 5.79 percent in July.
Inflation was recorded at 8.01 percent during the corresponding month of the previous year, according to data released here by the ministry of commerce and industry.
There was a steep rise in food prices. Food inflation jumped to 18.18 percent in August as compared to 9.34 percent recorded in the corresponding month of last year. Food inflation was 11.9 percent in July this year.
Prices of vegetables almost doubled. Onion prices soared by 244.62 percent year-on-year.
Eggs, meat and fish became costlier by 18.86 percent. Rice became costlier by 20.13 percent. Wheat price jumped by 7.6 percent and prices of cereals soared by 14.35 percent.
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Commenting on the monthly data, chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said the depreciation in the value of rupee has led to the rise in inflationary pressure.
However, Rangarajan expressed hope that inflation would moderate in the coming months on the back of good monsoon.
"Over the next few months food inflation will start coming down because of good monsoon and that would have an impact on rest of things," he said.
Rangarajan said inflation would be around 5.5 percent by the end of the current financial year.
The headline inflation data for June was revised upward to 5.16 percent from 4.86 percent reported earlier.
In August, there was a sharp increase in fuel and power and primary articles prices also. Primary articles inflation soared to 11.72 percent. Fuel and power inflation jumped to 11.34 percent.
"The revival of inflation especially that of food prices, calls for urgent steps to address supply side bottlenecks which have been plaguing the sector," said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).
However, he said the rise in inflation should not come in the way of cutting rates by the central bank in the forthcoming monetary policy.
The Reserve Bank of India (RBI) is scheduled to announce its monetary policy Sep 20.
"While keeping inflation under check has to be a priority, it is imperative that we continue efforts to rekindle investor sentiment and push for higher growth," said FICCI secretary general A. Didar Singh, emphasizing on the need for rate cuts in the forthcoming policy review.