Inflation worry continues in August after GST implementation

The consumer prices have gone up due to unfavorable weather conditions and the shortage of supply of vegetables according to Reuters

The consumer prices have gone up due to unfavorable weather conditions and the shortage of supply of vegetables according to Reuters

Daily consumables like fruits and vegetables turned costlier during the month with inflation print coming at 5.29 per cent and 6.16 per cent, respectively as against 2.83 per cent and (-) 3.57 per cent in July, according to the data released by the Central Statistics Office (CSO).

Martin Beck, lead United Kingdom economist at Oxford Economics, said: "Annual CPI inflation of 2.6% in July was unchanged from the previous month, offering some cause to think that "peak-pain" for consumers from elevated inflation had been reached".

Among the CPI components, inflation of food and beverages accelerated to 1.96% in August 2017 from 0.43% in July 2017 mainly contributing to the increase in CPI inflation.

Analysts hope a higher inflation would ease the pressure on the Reserve Bank of India and it might cut the interest rates on October 4, when the bank will hold its next monetary policy review meeting.

Fuel prices sank by 1.3% for the period after growing by 0.7% between June and July in 2016.

Prices in all broad categories were in August 2017 than a year ago, the data showed, and there were rises in all measures of inflation, including producer input prices, showing inflationary pressures continue to build. The headline inflation figure was also matched by the move in RPI inflation that pushed up to 3.9 percent in August, with both this and the RPI index at 274.7, well ahead of consensus expectations.

Paul Hollingsworth, UK economist at Capital Economics, said the latest figures were likely to provide "further ammunition" to those members of the Bank's rate-setting Monetary Policy Committee who favour an earlier rise in interest rates. In March, inflation was recorded at 3.89 per cent.

Clothing and footwear was one of four sub-sectors of the ONS's basket of goods that saw price growth reach a four-year high last month.

Meanwhile acceleration in clothing and footwear prices at 4.6% was the largest seen in the core index of consumer prices since its introduction in 2006. Fuel inflation, too, showed an uptick at 4.94 per cent in August compared to 4.84 per cent in July.

India's growth unexpectedly slowed down to 5.7 percent in the June quarter - the slowest pace in three years - highlighting the disruptions caused by the rollout of the new tax system and the currency shock.

These rises mean those on the lowest incomes will be hit hardest.

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