High food prices, especially of onion and other vegetables, pushed up September inflation to 7-month high of 6.46 per cent that may make it difficult for the Reserve Bank of India (RBI) to cut key interest rate on October 29 to spur industrial growth.
The Wholesale Price Index (WPI) based inflation rose for the fourth month in a row, government data revealed today.
Inflation was 6.1 per cent in August and 5.85 per cent (revised upward from 5.79 per cent) in July. In September last year, it was 8.07 per cent.
The sharpest increase was in onion prices which jumped by 322.94 per cent in September, over the same month last year.
Vegetables in general were costlier by 89.37 per cent year-on-year making life difficult for the common man.
Fruits too were costlier by 13.54 per cent year-on-year during September.
Overall, the food inflation increased at higher rate in September at 18.40 per cent as compared to the previous month. Inflation in this segment was 18.18 per cent in August.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said that if inflation is higher than 6 per cent it is high and at an "uncomfortable" level. However, he expressed confidence that it would ease in the coming months.
Food Minister K V Thomas said cost of production has increased due to NREGA wages, besides higher MSP.
The Reserve Bank of India, which is scheduled to unveil the second quarter review of monetary policy on October 29, will factor in the rising inflation while deciding on the policy rates amid rate cut demand by industry to boost economic activities.
The August IIP data, a key economic indicator, showed that industrial output expanded by meagre 0.6 per cent.
The data further revealed that there was decline in prices of egg, meat, fish, beverages, tobacco, cereals, rice and wheat in the month under review over August.
The inflation in the manufactured items segment was 2.03 in September year-on-year.
Inflation for LPG (liquefied petroleum gas) and petrol was at 9 per cent and 9.64 per cent, respectively, on annual basis.
"I agree that inflation rate is still on the high side but it will soften in a month or so... The comfort level of inflation is 5-6 per cent and if it is higher than 6 per cent, it is uncomfortable," Ahluwalia told reporters.
He said the steps taken by government to de-stock the excess food stocks would result in