Inflation accelerated in September for the first time since June. At 4.41 percent the yearly rise in consumer prices was up 0.7 percentage points versus August's upwardly revised near-record low but only marginally above expectations. It was also still well short of the 5.2 percent average recorded over the first half of 2015.
The rise reflected mainly steeper gains in the urban sector and inflation here rose from 2.75 percent to 3.61 percent. The rural rate increased a more modest 0.58 percentage points to 5.05 percent. By far and away the main driving force was food where prices jumped 3.88 percent from a year ago after a 2.20 increase in mid-quarter.
Despite September's acceleration inflation remains some way below the RBI's 6 percent target rate for next January. However, a 14 percent shortfall in third quarter rainfall versus average could make for some near-term upside pressure as will the recent back-up in oil prices.
Accordingly, having only just cut key interest rates by 50 basis points in September the likelihood is that the RBI will be on hold now at least through year-end.
Consumer Price Indexes (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption. The data are released for previous month and are not seasonally adjusted.
CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.
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