New Delhi, Sep 14 (IANS) India's inflation in August rose to 9.78 percent, sparking speculations that the Reserve Bank of India (RBI) will go in for another rate hike even though policymakers are concerned about slackening industrial output.
The headline inflation, based on the wholesale price index, rose to 9.78 percent in August as compared to 9.22 percent in the previous month and 8.87 percent in August 2010, according to data released by the Commerce and Industry Ministry Wednesday.
The primary articles index rose to 12.58 percent in August, while that for fuel and power went up to 12.84 percent. The index of manufactured products saw a rise of 7.79 percent, while food articles became dearer by 9.62 percent.
The figures for June were also revised upwards to 9.51 percent from the earlier projected 9.44 percent.
"It is another bad news... inflation has gone up from 9.22 percent to 9.78 percent, perilously closer to the double-digit figure," Finance Minister Pranab Mukherjee told reporters.
The RBI has hiked its policy rates 11 times since January 2010 to curb inflation.
However, despite the aggressive monetary tightening, inflation has remained stubbornly high, near double-digit, much above the central bank's comfort level of four-five percent.
Analysts largely expect RBI to hike key interest rates by at least another 25 basis points when it takes up a review of the monetary policy Friday.
"All the inflation component numbers are way beyond the RBI's comfort zone and more than its estimate of headline inflation averaging at 9 percent in the first half of the current fiscal," said Jay Shankar, chief economist - director, Religare Capital Markets.
"Crude remaining sticky remains the biggest risk to inflation outlook, with temporary domestic factors receding fast - thanks to a very good monsoon," he added.
India Inc has been blaming the central bank's hawkish stance for a decline in growth.
India's GDP growth declined to 7.7 percent in the April-June 2011 period, the slowest in six quarters, while industrial output slumped to 3.3 percent in July, the slowest in 21 months.
"Overall statistics reveal that inflation since January 11 has consistently remained over 9 percent despite persistent rate hikes by the RBI. We hope that the RBI pauses in the current cycle and reflects on alternate means to address this issue," said Anis Chakravarty, Director Deloitte Haskins & Sells.
"It is important to observe this as part of a larger picture and identify specific pressure points in the economy. The fear that inflation is becoming systemic now is quite real," added Chakravarty.