INSUBCONTINENT EXCLUSIVE:
Consumer inflation remained above the RBI's medium-term goal for past few months
Consumer inflation in the country increased to 7.34 per cent in September from 6.69 per cent in the previous month
as food prices continued to surge, government data showed on Monday
That marked the highest level of inflation recorded since January, and well above the upper end of the RBI's target range of 2-6 per cent
The latest reading of consumer inflation - or the rate of increase in retail prices of essential items - dashes hopes of further lowering of
key lending rates by the Reserve Bank of India
Determined by the Consumer Price Index (CPI), retail inflation was much higher compared to economists' estimates
According to a poll of economists by news agency Reuters, consumer prices were expected to rise 6.88 per cent last month from a year
ago.The consumer inflation reading of September is in line with the recent pause in key policy rates by the central bank. Food inflation -
or the rate of rise in food prices - came in at 10.68 per cent last month, as against 9.05 per cent in August, the data showed.Persistent
high prices have hurt the recession-stricken economy, which contracted a record 23.9 per cent in April-June despite the RBI lowering its key
repo rate by a cumulative 115 basis points since the pandemic started.Although the government has eased a range of lockdown restrictions to
support the economy, supply chain disruptions have shown little sign of abating as COVID-19 continues to spread rapidly in the
country."Unless the inflation doesn't fall below the higher band of 6 per cent, we don't expect the RBI to cut rates..
But eventually, as the supply shocks dissipate as the economy continues to unlock, we may see inflation falling back to the tolerance band,"
said Rahul Gupta, head of research-currency, Emkay Global Financial Services.The central bank - which typically tracks consumer inflation
primarily while formulating its monetary policy - left the key rates unchanged in a scheduled review last week, promising to continue with
its "accommodative" stance, which rules out any hikes for the time being.In its October 9 policy statement, the RBI had said inflation is
likely to remain elevated in September, and ease in the third (October-December) and fourth (January-March) quarters of current financial
year.Separate data on Monday showed factory production - measured by the Index Of Industrial Production (IIP) - dropped 8 per cent in
August, mainly due to weak activity in manufacturing, mining and power generation.The RBI has projected a contraction of 9.5 per cent for
the economy in the current financial year, which ends in March 2021, with a faster and stronger rebound "eminently feasible" if the current
momentum of upturn gains ground.
