Headline inflation eases marginally to 9.72% in Sep

Headline inflation remained close to the double-digit mark at 9.72% in September as all items, including food products, fuel and manufactured goods, grew costlier, a development likely to prompt the Reserve Bank to continue with its policy of monetary tightening.

Inflation, as measured by the Wholesale Price Index (WPI), stood at 9.78% in August. The rate of price rise was recorded at 8.98% in September, 2010.

As per data released by the government today, overall inflation in June this year was revised upward to 9.36% from the provisional estimate of 9.22%.

On an annual basis, food items became 9.23% more expensive during the month under review. Onions grew 23.58% costlier, while fruit prices were up 15.98% and the rates for potatoes rose by 14.64%.

Overall, vegetable prices witnessed 14.04% inflation during September, 2011.

Inflation in overall primary articles, which have a share of over 20% in the WPI basket, stood at 11.84% in September, compared to 12.58% in August.

Non-food primary articles, which include fibres, oil seeds and minerals, became dearer by 14.82% in September, as against 17.75% in the previous month.

Prices of manufactured products, which have a weight of around 65% in the WPI basket, went up by 7.69% year-on-year in September compared to 7.79% in August.

Inflation in manufactured products has been steadily rising since February this year, when it crossed the 6%-mark.

Among manufactured items, iron and semis grew dearer by 20.73%, edible oil prices rose by 13.45%, the cost of tobacco products moved up by 13.43% and cotton textiles became 12.55% more expensive.

In addition, wood and wood products became dearer by 8.18%, while prices of basic metal alloys and metal products rose by 10.94% year-on-year in September.

Inflation in the fuel and power segment stood at 14.09% on an annual basis in September, as against 12.84% in August. Oil marketing companies had hiked petrol prices by over Rs 3 per litre in mid-September and this seems to have been reflected in the numbers.

This is the tenth consecutive month when headline inflation has been above the 9%-mark.

Elevated inflation levels close to double digits are 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 12 times since March, 2010, to tame inflation. The bank's next policy review is scheduled for October 25.

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.

Growth in industrial production fell to 4.1% in August. Meanwhile, economic growth during the April-June period stood at 7.7%, the slowest expansion rate in the past six quarters.

During the central bank's meeting at Jaipur earlier this week, RBI Governor D Subbarao had said the rate hikes have affected industrial activities, but asserted that inflation continues to remain above comfort levels. He also said that interest rates would come down only if inflation eased.