Headline inflation surged sharply to inch closer to the double-digit mark, bolstering expectations of yet another round of interest rate hikes. This is despite concerns of flagging growth and a worsening global outlook.
The Wholesale Price Index-based inflation rose an annual 9.78 per cent in August, higher than the previous month's 9.22 year-on-year increase, Government data showed on Wednesday. Inflation was recorded at 8.87 per cent in August 2010.
The latest headline inflation estimate has been under watch, especially as industrial output data released earlier this week showed lower-than-expected growth. With inflation now climbing to its highest in more than a year, the RBI is widely expected to raise rates by another 25 basis points at its mid-quarter policy review on Friday.
Reacting to the data, the Finance Minister, Mr Pranab Mukherjee, was quoted as saying: “It (inflation) is perilously close to double digits ... RBI is also watching the situation like the Government and collectively it would be possible for us to tackle the problem.”
Sharply higher inflation in food items, including vegetables such as onions and potatoes, as well as fuel products, led to the spike in the latest headline estimates.
Manufactured products, especially processed food items such sugar and edible oils, too saw a surge in price levels during the latest reported month.
According to the latest data, the overall inflation figure for June this year has been revised upward to 9.51 per cent from the provisional estimate of 9.44 per cent.
On an annual basis, food items surged close to 10 per cent in August, with onions rising over 45 per cent, potatoes up 12 per cent, and fruit nearly 23 per cent. Overall, vegetable recorded 12 per cent inflation, up from 8 per cent in July.
Sequentially, a number of food items exhibited a sharp surge, including onions (over 19 per cent), potatoes (6 per cent), poultry and meat products (over 2 per cent) and rice (2 per cent) were up on a week-on-week basis.
Manufactured products
Manufactured products, which have a weight of around 65 per cent in the WPI basket, were up by close to 8 per cent year-on-year in August, as against a 7.5 per cent increase in July. Inflation in manufactured products has been steadily rising since February this year, when it crossed the 6 per cent-mark.
Among manufactured items, edible oil surged close to 13 per cent, tobacco products rose over 13 per cent, cotton textiles grew 17 per cent more expensive and wood and wood products were nearly 10 per cent costlier year-on-year.
The fuel and power sub-group surged close to 13 per cent in August, as compared to slightly over 12 per cent in July.