India August inflation accelerates to 7% on high food prices

INDIA’S retail inflation accelerated in August after easing for three months, posing a fresh challenge to the central bank’s efforts to cool prices.

Consumer prices rose 7 per cent last month from a year earlier, data released by the Statistics Ministry showed on Monday (Sep 12). That’s faster than an estimate of a 6.90 per cent gain in a Bloomberg survey of economists and compares with a 6.71 per cent reading in July.

Food prices, which comprise about half of the inflation basket, accelerated 7.62 per cent in August while fuel and electricity prices went up 10.78 per cent from a year ago, according to the government. Clothing and footwear prices increased 9.91 per cent, while housing prices jumped 4.06 per cent. Food costs rose as erratic monsoon rains and record heatwave hit farm output, offsetting the slump in global commodity prices.

The latest print adds pressure on the Reserve Bank of India that’s seeking to cool price gains back to its 2 per cent-6 per cent 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.

Meanwhile, industrial output rose to 2.4 per cent in July from a year ago, data released separately by the Statistics Ministry showed. That compares with the survey estimate of a 4.2 per cent increase and a 12.3 per cent growth in June. BLOOMBERG