India’s retail inflation rises to 7% in August; July IIP tumbles to 2.4%

India’s retail inflation snapped a three-month downward trend in August by rising marginally to 7% as food prices surged, showed government data on Monday.

Despite the government restricting wheat flour exports towards the end of last month, inflation – as measured by the consumer price index (CPI) – rose to an 7% in August, compared with 6.71% in the prior month. This may add pressure on the Reserve Bank of India to hike interest rates more aggressively in coming months.

India’s retail inflation has been above RBI’s upper tolerance limit of 6% for eight consecutive months.

Meanwhile, industrial growth, as measured by the Index of Industrial Production (IIP), tumbled to 2.4% in July from 12.3% in June.

This macroeconomic data is important for policymakers as it showcases the current state of manufacturing, mining and other important sectors.

Food inflation, which accounts for nearly half the CPI basket, soared as prices of essential crops like wheat, rice and pulses were driven higher by a record heatwave, squeezing household budgets.

While high inflation is a global phenomenon, it is felt acutely in a country like India where millions live in abject poverty.

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