Inflation in September eased — but only marginally, remaining at an elevated level of 9.72 per cent, making a case for RBI to go for another hike at its upcoming policy even as economic growth showed signs of a slowdown.
Annual wholesale price-based inflation declined on the back of a fall in the rate of price rise of food and manufactured products in September compared to the previous month. Inflation stood at 13-month high of 9.78 per cent in August.
This is almost the last crucial data before the central bank’s monetary review on October 25, even though some small numbers — such as weekly primary product inflation — and some segments of consumer price inflation will come before the policy.
All India consumer price index will also come next week, but it has so far not stabilised.
It is not a very comfortable situation, the Prime Minister’s Economic Advisory Council said. “For the monetary policy stance to change, inflation has to come down and show signs of definite decline,” pointed out its chairman C Rangarajan. “But that kind of an indication has not come.”
Yesterday, International Monetary Fund also said that continuance of monetary tightening was “appropriate” to tame inflation in India.
However, many other economists favour RBI to revisit its tight monetary measures as details of inflation suggest that the rate of crucial price rises have declined much more than headline numbers.
Yes Bank chief economist Shubhada Rao said core inflation, (measured by manufacturing non-food side) eased to a four month low of 7.55% from 7.77% in August.
The BRI has hiked policy rates 12 times since March last year, making credit dearer and hurting growth in the process. As such, chambers and economists have called the central bank to revisit its tight monetary stance, particularly after industrial growth data stayed below five per cent for the second month in a row in August.
Rao said sharp correction in core inflation momentum amidst an environment of softening growth both domestically and globally, provided an appropriate juncture for RBI’s monetary policy to be forward-looking. “Today’s inflation print strengthens a case for an end of rate tightening cycle,” he added.
Inflation in food articles eased to 9.23 per cent in September from 9.62 per cent last month. The major relief was seen in onion inflation at 23.58 per cent, which had climbed to 45.29 in August. Fruits also exhibited declining inflation at 15.98 per cent in September from 22.82 per cent in the previous month. Inflation in cereals, rice, wheat and pulses followed the similar trend.
Manufactured products too saw inflationary pressure, easing marginally at 7.69 per cent from 7.79 per cent in August. However, fuel and power recorded a hike in the rate of price rise from 12.84 per cent to 14.09 per cent in September on the back of a hike in petrol prices by Rs 3.14 a litre by oil marketing public sector units.
