In a double whammy for the economy, India’s retail inflation rate shot up to 7.41% in September from 7% in the preceding month while factory output contracted 0.8% in August, data released by the National Statistical Office showed.
The consumer price index (CPI) based inflation was driven by a higher food inflation rate of 8.6% in September while contraction in output of mining and manufacturing led to a dip in factory output.
With the September print of retail inflation above 6% mark, the Reserve Bank of India has officially missed the inflation target for the third consecutive quarter.
RBI governor Shaktikanta Das last month said he expects inflation to ease to 4% over the next two years.
According to the RBI Act, the monetary policy committee (MPC) of RBI has a 4% inflation target, with a variation of 2% on either side. It is seen as a failure of RBI if average inflation stays beyond the 2%-6% range for three consecutive quarters.
However, Das said RBI won’t make public its formal letter to the government in this regard. “It’s a privileged communication between the Reserve Bank and government. So at this point of time we cannot say whether it will be made public. From our side we will not make it public because it is a privileged communication,” Das said.
Amid the growing inflation challenge, the World Bank and the International Monetary Fund have pared down their growth projections for India to 6.5% and 6.8% respectively for FY23. The Reserve Bank of India, in its latest monetary policy, lowered its FY23 growth forecast to 7% from 7.2% estimated earlier.