Retail inflation rises to 7 per cent in August on high food prices

As per government data, Retail inflation inched up to 7 per cent in August from 6.71 per cent in July, mainly due to higher food prices. Monday's data showed that Food prices, which comprise about half of the inflation basket, accelerated 7.62% in August, while fuel and electricity prices went up 10.78% from a year ago, according to the government. Clothing and footwear prices increased 9.91%, while housing prices jumped 4.06%. Food costs rose as erratic monsoon rains and a record heatwave hit farm output, offsetting the slump in global commodity prices.

Monday’s data snapped a three-month downward trend and adds pressure on the Reserve Bank of India, which is seeking to cool price gains back to its 2%-6% target, while shielding the economy in the face of a global slowdown. The central bank has raised the benchmark policy rate by 140 basis points so far and is scheduled to hold its next rate review on Sept. 30.Erratic monsoon patterns across the country suggest more crop damages, keeping food prices elevated in the coming months, with negative seasonality kicking in for September-November and weighing on price pressures. The government has put restrictions on the export of wheat, sugar, and rice in an effort to keep local prices from rising as a result of the country's uneven rainfall distribution.