A surge in fuel prices pushed headline inflation to 7.81% in September, the highest surge so far in the current fiscal, dampening hopes that the Reserve Bank of India (RBI) would reduce interest rates in its monetary policy on October 30. In August, inflation as measured by the wholesale price index was 7.55%.Inflation in diesel price rose to 8.94% in September from 0.36 per cent in August, as the government raised the price of the fuel by R5 per litre last month.
In the food category, wheat became dearer by 18.63% compared to 12.85% in August, while cereals became more expensive by 14.18% from 10.7%.
Chairman of the Prime Minister’s Economic Advisory Panel, C Rangarajan, said that though inflation would ease going forward, the central bank may not be able to cut interest rates given the current situation. “When inflation continues to rise, it becomes a very difficult situation... I am only saying that the circumstances are not too favourable,” he said.
The industry has underlined the need to reduce interest rates to spur growth. The government has undertaken several fiscal measures to boost growth. The central bank, which maintained that high inflation is a cause for worry, has held policy rate at 8% since April, though economic growth has slowed down.
“Moderation in inflation is expected as measures to rein in the fiscal deficit will reduce consumption expenditure and thus have a salutary effect on prices,” said RV Kanoria, president, Federation of Indian Chambers of Commerce and Industry.