New Delhi, October 12
The stock markets and the rupee will come under pressure when markets reopen on Thursday after the government announced worse-than-expected inflation numbers for the month of September and 0.8% contraction in industrial output in August, according to two sets of data released on Wednesday.
Highest in 5 months
Consumer price index-based inflation in September saw the highest rate of increase in five months and retail food price inflation was 8.6%. But does the PM care? FM went to a Chennai market made for nice visuals but price rise continues unabated — Jairam Ramesh
Retail inflation rose to 7.41% in September as against 7% in August and 4.35% in September last year. Worse, the rural areas continue to suffer from a higher inflation rate of 7.56% as against 7.27% in the urban areas. This is the ninth month in a row that retail inflation has hovered over the RBI’s tolerance level of 6%.
Inflation in the food basket rose to 8.60% in September from 7.62% in August. The RBI this month is slated to submit a report to the Centre detailing its inability to contain inflation at 4% with a bias of 2% on either side.
Industrial production slipped to an 18-month low, contracting by 0.8% in August, mainly due to a decline in output of the manufacturing and mining sectors. The data showed that the previous low in industrial output growth was a contraction of 3.2% in February 2021.
Factory output, measured in terms of the Index of Industrial Production (IIP), had expanded by 13% in August 2021. The IIP grew by 2.2% in July this year.
“The CPI data has come up worse than expected. Not only that, the Index of Industrial Production (IIP) has contracted. This would put pressure on the RBI to hike rates further, especially in light of the falling rupee. We could expect pessimism and sell-off pressure from FIIs tomorrow,” said analyst Sonam Srivastava with Wright Research.
Food inflation surges to 8.6%
- Inflation has been above the Reserve Bank of India’s targeted zone for the ninth month in a row
- Higher inflation was led by food items. Food inflation surged to a 22-month high of 8.6% while core inflation rose to a four-month high of 6.3%
- The Index of Industrial Production (IIP) declined 0.8% in August with heavy rains dampening construction activity and electricity demand, and the bleak manufacturing output
