Headline inflation inched up to 7.81 per cent in September — its highest level during the current fiscal — as along with the cascading impact of the hike in prices of diesel and other fuels, wheat, cereals and certain other edibles also turned costlier.
Even as inflation in September, as measured by the Wholesale Price Index (WPI), is only marginally higher than the level of 7.55 per cent in August and lower than 10 per cent in September, 2011, it marks a 10-month high since November last year when it was at 9.46 per cent.
The hike in the price of diesel by over Rs.5 a litre on September 13 stands reflected in the inflation for the ‘fuel and power’ category, soaring to 11.88 per cent for the month from 8.32 per cent in August. Besides diesel, aviation turbine fuel and kerosene also turned dearer. As for diesel alone, inflation for the segment went up by 8.94 per cent.
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As per the WPI data, the fresh spurt in inflation in September, 2012, is despite a high base of 10 per cent in the same month a year ago and economic analysts view that the rising price trend is likely to limit the headroom available to the Reserve Bank of India (RBI) to tweak its key policy rates later this month as a measure to kick-start the investment cycle and boost growth.
Commenting on the inflation numbers, Prime Minister's Economic Advisory Council (PMEAC) Chairman C. Rangarajan noted that although he expected the inflation level to decline going forward, the current situation was not favourable for the RBI to go in for a rate cut. “When inflation continues to rise, it becomes a very difficult situation...I am only saying that the circumstances are not too favourable [for easing policy rates],” he said.
Although food inflation declined to 7.86 per cent in September from 9.14 per cent in August, wheat was costlier by 18.63 per cent and cereals by 14.18 per cent on a year-on-year basis. Alongside, potatoes were also dearer by 52.20 per cent and rice by 12.41 per cent during the month. Prices of eggs, meat and fish were also higher by 12.44 per cent while milk and fruits were dearer by 6.25 per cent and 6.96 per cent, respectively on an annual basis. Inflation in the manufactured products category also inched up to 6.26 per cent in September from 6.14 per cent in August with items such as cotton textiles, paper and paper products, rubber and plastic products costing more.
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India Inc., however, sought to argue in favour of a rate cut by the RBI. Apex chamber CII noted that the headline inflation had increased marginally “in spite of increase in fuel prices, especially that of diesel” and the impact has been lower than expected. In a statement, the chamber’s Director-General Chandrajit Banerjee pointed to the “good news” that food prices had witnessed a decline in prices in September 2012 as compared to the previous month and manufacturing prices remain reasonably stable. “The declining trajectory of inflation should spur the RBI to revisit its monetary policy stance and cut its policy rates to rejuvenate growth in the industry,” he said.