BackRetail inflation rises to 9.84% in September
Retail food inflation index accelerated to 11.44% in September from a month ago
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New Delhi: Retail inflation quickened to 9.84% in September from 9.52% a month ago, breaking the two-month downward trend and increasing the chances that the Reserve Bank of India (RBI) will increase interest rates in its monetary policy review later this month.
The retail food inflation index accelerated to 11.44% in September from a month ago, mostly due to higher vegetable prices which shot up 34.9%.
Data released earlier on Monday showed that India’s wholesale inflation accelerated to 6.46% in September compared with 6.1% in the preceding month because of rising vegetable prices, including that of onion which increased more than four-fold during the month.
Till August both the wholesale and retail inflation numbers were showing divergent trends, with wholesale quickening and retail slowing, though it remained sticky around 10%.
“To some extent, the divergence between WPI (wholesale price index) and CPI (consumer price index) can be attributed to statistical differences stemming from coverage, classification of items and the relative weights of their constituents. However, there could be other reasons for this as well. For example, higher transaction costs, taxes, etc. are reflected in the CPI but not in the WPI," he added.
While analysts have long contended that more reliance on wholesale inflation by RBI in determining its monetary policy is flawed, the central bank has also started incorporating the CPI-based inflation data which is only a year and half old. Traditionally, CPI inflation is being used for monetary policy in most of the countries.
Subbarao in August said before using the new CPI that the central bank will need to satisfy itself on several other fronts. “Does the new CPI ensure sufficient national representativeness in terms of coverage and current consumption baskets? Does it adequately cover prices of services? Is the number of price quotations being obtained for computation of the index sufficiently large?," he said.
He, however, had said that it is unlikely that RBI will ever make a clean break and abandon using WPI altogether.
“Analytically it would be useful to develop a series of producer price index (PPI) that would help us to gauge how price momentum builds up in the economy," he said.
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