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Overall inflation soars to 9.78% in Aug

September 14, 2011 12:38 IST

MoneyHeadline inflation inched closer to the double-digit mark in August, rising to 9.78 per cent on the back of soaring prices of food and manufactured products, which may prompt the Reserve Bank of India to continue with its monetary tightening policy.

Overall inflation, as measured by the Wholesale Price Index, stood at 9.22 per cent in July.

The rate of price rise stood at 8.87 per cent in August, 2010.

As per data released by the government today, 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 became 9.62 per cent more expensive during the month under review.

Onions grew 45.29 per cent costlier, while fruit prices were up 22.82 per cent and the rates for potatoes rose by 12.53 per cent.

Overall, vegetable prices witnessed 11.80 per cent inflation during August, 2011.

Inflation in overall primary articles, which have a share of over 20 per cent in the WPI basket, stood at 12.58 per cent in the month under review.

Non-food primary articles, which include fibres, oil seeds and minerals, became dearer by 17.75 per cent.

Prices of manufactured products, which have a weight of around 65 per cent in the WPI basket, went up by 7.79 per cent year-on-year in August.

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 became dearer by 12.94 per cent, tobacco product prices rose by 13.17 per cent, cotton textiles grew 16.86 per cent more expensive and wood and wood products were 9.72 per cent costlier year-on-year.

In addition, iron and semis grew dearer by over 20 per cent, while prices of basic metal alloys rose by 11.56 per cent during August, 2011.

Inflation in the fuel and power segment stood at 12.84 per cent year-on-year

in the month under review, as per the index.

This is the ninth consecutive month when headline inflation has been above the 9 per cent-mark.

The jump in inflation to close to double digits is likely to put pressure on the Reserve Bank to continue with its policy of monetary tightening, according to experts.

The apex bank has already hiked key policy rates 11 times since March, 2010, to tame inflation.

The bank's next mid-quarterly policy review is scheduled for September 16.

India Inc has said the string of rate hikes, which have raised the cost of borrowing, have acted as a dampener to fresh investment and hindered growth.

Industrial production plunged to a 21-month low of 3.3 per cent in July.

Meanwhile, economic growth during the April-June period stood at 7.7 per cent, the slowest expansion rate in the past six quarters.

Both the government and the RBI have projected headline inflation to remain elevated till the third half of the current fiscal, mainly on account of pressure from international commodity prices.

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