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High food prices push retail inflation to 5-month high of 7.41% in Sept -Asit Ranjan Mishra

-Business Standard

IIP shrinks 0.8% in Aug - a first in 17 months

In a double whammy for the Indian economy, the retail inflation rate shot up to a five-month high in September, while factory output contracted after a gap of 17 months in August. This could force the Reserve Bank of India (RBI) to hike the repo rate yet again in December.

Data released by the National Statistical Office showed that consumer price index (CPI)-based inflation accelerated to 7.41 per cent in September from 7 per cent in the previous month, driven by a 22-month high food inflation rate of 8.6 per cent.

Meanwhile, the index of industrial production (IIP) shrank 0.8 per cent in August, after growing 2.2 per cent in July, led by contraction in mining (3.9 per cent) and manufacturing (0.7 per cent).

However, electricity output grew 1.4 per cent. With the retail inflation print remaining above 6 per cent for the ninth consecutive month, the RBI has officially missed its inflation target for the third successive quarter. This means it will have to write a letter to the government explaining the reasons for its failure and the steps it will take to correct this.

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