Retail inflation rises to 7% in Aug as food prices surge; IIP growth slows

FinMin blames adverse base effect, increase in food and fuel prices

India’s retail inflation rate reversed its three-month downward trend in August, rising to 7 per cent from 6.7 per cent in the previous month, driven by a surge in food prices. This could put pressure on the central bank to further hike policy rates later this month, even though growth in factory output decelerated sharply in July.  

The finance ministry said the “moderate” increase in retail inflation was attributable both to an adverse base effect and an increase in food and fuel prices. “Despite erratic monsoons and negative seasonality in vegetable prices, food inflation is still lower than the April peak