Inflation was highest since September 2014, when it was at 6.46 per cent.
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Retail inflation rose to a almost 2 year high of 6.07 per cent in July this year, as prices of food items climbed ahead of the festival season.
July’s reading is also higher than the RBI’s 5% target for retail inflation by March 2017, and comes days after central bank governor Raghuram Rajan kept interest rates unchanged-citing inflation fears-in his last monetary policy before he returns to academia next month.
Leading the pack was annual food price inflation, which rose to 8.35 percent as compared to 7.79 percent in June.
In order to address the issue, the government announced last week that it set RBI a target of 4 per cent for the next five years.
Retail inflation surged to 6.07 per cent in July, overshooting the government and central bank’s comfort zone of 5 per cent, even as manufacturing growth remained nearly standstill at 0.9 per cent in June. Vegetable prices rose 14%, while sugar and confectionary rose 21.9%.
The inflation level still remains benign but risk still remains due to the implementation of the Seventh Pay Commission.
The RBI’s key lending rate, the repo, is now at 6.5 percent, the lowest since early 2011. The central bank hoped that a favorable monsoon could help to moderate food prices.
Most expect another cut of 25 basis points by December, before the central bank hits the pause button.
“The appointment of a more dovish candidate as the next governor would raise the chances of further monetary loosening”, Shah said. The index is at a 23-month high, data compiled by BloombergQuint shows.
Manufacturing output rose 0.9 percent and mining production grew 4.7 percent. Production in the electricity sector increased 8.3 percent. It was 8.35 per cent for the whole of India, 8.25 per cent in rural areas and 8.80 per cent in the urban conclaves.
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The industrial output data is based on an old series not reflected in India’s current gross domestic product figures.
