India’s CPI-inflation soars to double digit at 10.03% in August

Driven by the rise in food inflation, annual rate of inflation, based on the consumer prices index (CPI) in India, creeping higher in the month of August, entered double digit figure of 10.03 percent. Food inflation in the CPI accelerated to 12.03 percent in August from 11.53 percent in July 2012 . According to the data released by Central Statistics Office, provisional annual inflation rate based on all India general CPI (Combined) for August 2012 on point to point basis stood at 10.03 percent as compared to 9.86 percent for the previous month of July 2012. However, July consumer price inflation was revised lower to 9.76 percent from 9.86 percent earlier.

According to the Ministry of Statistics and Programme Implementation, which released the monthly provisional CPI on Base 2010=100 along with annual inflation rates for August 2012, all India provisional General (all groups), CPI numbers of August 2012 for rural, urban and combined were at 124.3, 121.11 and 122.9 respectively. The corresponding inflation rates for rural and urban areas for August came in at 9.90 percent and 10.19 percent respectively as against July’s  9.76 percent and 10.10 percent, respectively, which indicated that the rate of price rise rose in both in rural and urban areas.

India has the highest retail inflation among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa -- and is way above the Reserve Bank of India (RBI)’s comfort level. However, unlike most central banks, the RBI uses wholesale inflation in its policy formulation, as annual consumer price inflation data was only launched this year in January.

Driven by higher food prices due to deficient monsoon, the wholesale price index (WPI), India's main inflation gauge, shockingly rose at 7.55% for the month of August, as compared to 6.87% (Provisional) for the previous month and 9.78% during the corresponding month of the previous year. Meanwhile, furthering its anti-inflationary stance, the RBI, in its mid-quarter monetary policy review, leaving the key policy rates, viz. repo and reverse repo rate unchanged, only slashed cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.75 per cent to 4.50 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning September 22, 2012.