Inflation touches 10-month high in September

A hike of over `5 in prices of diesel in September coupled with rising prices of food items and other commodities pushed inflation to a 10-month high of 7.81 per cent in September, dampening hopes of a much anticipated cut in interest rates by the Reserve Bank of India.

Inflation, as measured by Wholesale Price Index (WPI),  stood at 7.55 per cent in August and at 10 per cent in the year-ago period. This is the fastest pace of growth in inflation since November last year when it was at 9.46 per cent. With regard to diesel, inflation for the segment rose by 8.94 per cent, from 0.36 per cent in the previous month.

The rise in inflation would give little headroom to RBI for easing policy rates in its upcoming second quarter monetary policy review on October 30. India Inc has been vociferously demanding lowering of interest rate for boosting investments and reviving investor sentiment.

Commenting on September inflation numbers, Prime Minister’s Economic Advisory Panel Chairman C. Rangarajan expressed confidence that inflation would decline going forward, but the current situation is 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 rate cut),” he said.

Food inflation, as a category, declined to 7.86 per cent during the month of September, from 9.14 per cent in the previous month. Food articles have 14.3 per cent share in the WPI basket.