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Rising food prices push India's August retail inflation to five-month high

Reuters  |  NEW DELHI 

By Manoj Kumar

(Reuters) - India's consumer price rose more than expected to a five-month high in August, fuelled by strong gains in prices of food items, dampening chances of a rate cut by the Reserve of (RBI) in a policy review next month amid weak economic growth.

India's consumer price index (CPI) rose 3.36 percent in August from a year earlier, data released by the Ministry of Statistics on Tuesday showed.

Analysts polled by had expected CPI would edge up to 3.20 percent, compared with 2.36 percent in July.

Last month, the RBI cut its main policy rate by 25 basis points to 6 percent, the lowest since 2010, while keeping its policy stance at "neutral".

Analysts said a rise in for two straight months has reduced the chances of another rate cut by the Reserve of India, which has a central target of 4 percent.

"We are of the opinion that RBI will not deliver any rate cut this calendar year," said Hitesh Jain, an analyst at IIFL Wealth Management.

The monetary policy committee (MPC) of the central had warned prices could start accelerating soon, reflecting caution, despite pressure to cut more aggressively after consumer remained below its central target since October.

had eased to 1.46 percent in June - its slowest pace since started releasing retail figures in January 2012, based on combined data for rural and urban consumers.

Separately, annual industrial output grew at 1.2 percent in July, in line with the forecast by economists in a poll, the data showed.

Industrial output contracted 0.2 percent in June.

Asia's third largest slowed to a three-year low in the three months to June, delivering a blow to Prime Minister Narendra Modi, who faces criticism for disrupting business activity with his shock cash squeeze last year.

LOWER FOOD OUTPUT

India's food grain production is expected to fall this year following a decline in areas under plantation, following unfavourable weather conditions in some states.

Seasonal monsoon rains have caused damage to some crops and hit movement of goods.

"Looking ahead, price pressures are set to rise further," said Shilan Shah, an economist at Capital Economics in Singapore.

Retail food inflation, which accounts for about 54 per cent of the consumer price index, rose 1.52 percent in August after prices contracted in the previous three months.

(Additional reporting by Rajesh Kumar Singh; Editing by Clarence Fernandez)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, September 12 2017. 18:28 IST
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