Retail inflation rises in September to 7.41 per cent

India's retail inflation accelerated to 7.41 per cent in September from a year ago on higher food and energy costs, the highest since April and above the upper end of the RBI's 2-6 per cent tolerance band in each month this year. Data released by the National Statistics Office showed consumer price index-based inflation (CPI) in September rising to 7.41 per cent from a year ago, compared to August's 7 per cent. The latest reading will pressure the RBI to accelerate policy tightening further, even at the cost of the economy, after raising its key repo rate to a three-year high of 5.9 per cent in four increments this year to tame surging prices.

Within food and beverages, cereals and vegetables continue to see high prices. While vegetables saw a 18% jump in prices during the month, cereal prices increased 12% year-on-year. Rural areas recorded higher inflation with 7.56% y-o-y growth than urban areas that saw 7.27% inflation. Unlike expected by the Reserve Bank of India (RBI), inflation is yet to show signs of cooling off, and the September numbers should certainly ring an alarm bell.Meanwhile, industrial production also witnessed a dip in August as Index of Industrial Production (IIP) contracted by 0.8% compared to 2.4% growth in the previous month. A weakening rupee has made the RBI's efforts to reign in imported inflation tougher. The domestic currency has repeatedly hit new record lows, weakening from about 79 per dollar to over 82 in a month. For the year, the rupee has lost over 10 per cent against a rampant dollar. The Indian central bank has spent nearly $100 billion from its forex reserves to stem the domestic currency's losses.