Wholesale Inflation Hits Four-Month High of 3.24% in August

India’s wholesale price inflation rose to 3.24% from a year ago, its fastest pace in four months, driven by higher prices of food and fuel products, data showed. The rise compares with a 3% increase forecast by economists in a Reuters poll and a provisional 1.88% rise in July.

Wholesale food prices in August rose 4.41% on year, compared with a 2.12% rise a month earlier, government data showed on 14 September 2017. The government reported that inflation rate based on retail prices also rose sharply to 3.36%. Although the August numbers appear moderate, prices are seen rising in the coming months as demand picks up ahead of the festive season and food prices spike because of drought-like situation in many states.

The faster-than-expected rise in inflation has a bearing on the Reserve Bank of India, which is being nudged to lower interest rates in order to revive investment and growth that have gone sluggish in recent quarters. Latest data on industrial production, released on Tuesday, showed industrial growth marginally improved to 1.2% in July compared to a contraction of 0.2% a month earlier. It was, however, sharply lower compared to 4.5% growth seen in July last year. The industry has been pushing for cuts in interest rates to help revive investment and reverse the sluggish growth in factory sector.

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