India's retail inflation surged to 7.41 per cent in September from 7 per cent in the preceding month, mainly becasue of costlier food items. On the other hand, factory output contracted 0.8 per cent in August, according to a data released by the National Statistical Office (NSO) showed.
This is the ninth-month in a row that retail inflation has remained above the Reserve Bank of India's (RBI's) tolerance band of 6 per cent. It was at 7 per cent in August and 4.35 per cent in September 2021.
Inflation in food basket rose to 8.60 per cent in September this year from 7.62 per cent in August. With inflation remaining above the 6 per cent level, RBI, now, will have to give a report to the central government giving reasons for failure to contain inflation at 4 per cent with a bias of 2 per cent on either side.
The central government has mandated the RBI to ensure that retail inflation remains in the range of 2-6 per cent.
In September, RBI Governor Shaktikanta Das said acute imported inflation pressures felt at the beginning of this fiscal year have eased but it still remains elevated across food and energy items.
Last month, the RBI governor said he expects inflation to ease to 4 per cent over the next two years. He said that inflation expected to remain elevated at 6.7 per cent for FY23. Recent correction in global crude oil prices if sustained may provide relief to inflation, he pointed out at the last MPC meet.
According to the RBI Act, the monetary policy committee (MPC) of RBI has a 4 per cent inflation target, with a variation of 2 per cent on either side. It is seen as a failure of RBI if average inflation stays beyond the 2-6 per cent range for three consecutive quarters.
The central bank’s MPC last month raised the repo rate by 50 basis points to 5.9 per cent to curb the rising inflation.