Zee Media Bureau
New Delhi: Retail inflation edged down to 7.8 percent in August compared to 7.96 percent in July.
Consumer food price inflation, under a new series published by the government, however, edged up to 9.42 percent in August from 9.36 percent in the previous month.
The numbers come weeks after the economy posted its fastest growth in 2-1/2 years, helped by a revival in industrial activity, prompting Prime Minister Narendra Modi to paint a rosier outlook for coming quarters.
However, high inflation would make it tougher for Modi to encourage consumers, who power nearly 60 percent of the economy, to loosen their purse strings. It would also make the central bank wary of lowering interest rates later this month.
The RBI, which wants to reduce retail inflation to 6 percent by 2016, left interest rates steady last month, citing inflationary risks from late monsoon rains.
While falling global crude prices, moderating vegetable prices, a stable rupee and a favourable statistical base will likely ease inflation, the RBI is widely expected to keep rates on hold when it reviews its monetary policy on Sept. 30.
Modi won India`s strongest electoral mandate in 30 years in May, vowing to lift sliding economic growth, cool inflation and create enough jobs for its young workforce.
The optimism fanned by Modi`s rise to power has already brought inflows of nearly $14 billion of foreign funds into Indian equities this year as investors bet that his drive to cut red tape would revive stalled projects and underpin the economic recovery.
To sustain this euphoria, economists say, Modi must overhaul India`s strained public finances, stringent land acquisition laws, chaotic tax regime and rigid labour rules.
During his first 100 days in office, the new prime minister showed little appetite for such structural changes, and there is concern that sharply higher growth in the last quarter could obviate the urgency to press ahead with them.
With agency inputs
