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Headline Inflation Eases Marginally

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Headline inflation remained close to the double-digit mark at 9.72 per cent in September as all items, including food products, fuel and manufactured goods, grew costlier, a development likely to prompt the Reserve Bank to continue with its policy of monetary tightening.

Inflation, as measured by the Wholesale Price Index (WPI), stood at 9.78 per cent in August. The rate of price rise was recorded at 8.98 per cent in September, 2010.

As per data released by the government Friday, overall inflation in June this year was revised upward to 9.36 per cent from the provisional estimate of 9.22 per cent.

On an annual basis, food items became 9.23 per cent more expensive during the month under review. Onions grew 23.58 per cent costlier, while fruit prices were up 15.98 per cent and the rates for potatoes rose by 14.64 per cent.

Overall, vegetable prices witnessed 14.04 per cent inflation during September, 2011.

Inflation in overall primary articles, which have a share of over 20 per cent in the WPI basket, stood at 11.84 per cent in September, compared to 12.58 per cent in August.

Non-food primary articles, which include fibres, oil seeds and minerals, became dearer by 14.82 per cent in September, as against 17.75 per cent in the previous month.

Prices of manufactured products, which have a weight of around 65 per cent in the WPI basket, went up by 7.69 per cent year-on-year in September compared to 7.79 per cent in August.

Inflation in manufactured products has been steadily rising since February this year, when it crossed the 6 per cent-mark.

Among manufactured items, iron and semis grew dearer by 20.73 per cent, edible oil prices rose by 13.45 per cent, the cost of tobacco products moved up by 13.43 per cent and cotton textiles became 12.55 per cent more expensive.

In addition, wood and wood products became dearer by 8.18 per cent, while prices of basic metal alloys and metal products rose by 10.94 per cent year-on-year in September.

Inflation in the fuel and power segment stood at 14.09 per cent on an annual basis in September, as against 12.84 per cent in August. Oil marketing companies had hiked petrol prices by over Rs 3 per litre in mid-September and this seems to have been reflected in the numbers.

This is the tenth consecutive month when headline inflation has been above the 9 per cent-mark.

Elevated inflation levels close to double digits are likely to put pressure on the Reserve Bank to continue with its policy of monetary tightening, according to experts.

The apex bank has already hiked key policy rates 12 times since March, 2010, to tame inflation. The bank's next policy review is scheduled for October 25.

India Inc has said the string of rate hikes, which have raised the cost of borrowing, have acted as a dampener to fresh investment and hindered growth.

Growth in industrial production fell to 4.1 per cent in August. Meanwhile, economic growth during the April-June period stood at 7.7 per cent, the slowest expansion rate in the past six quarters.

During the central bank's meeting at Jaipur earlier this week, RBI Governor D Subbarao had said the rate hikes have affected industrial activities, but asserted that inflation continues to remain above comfort levels. He also said that interest rates would come down only if inflation eased.