Retail inflation decelerated sharply to 5.05% in August, while industrial production contracted by 2.4% in July, the lowest in eight months. The fall in retail inflation from 6.07% in July was because vegetable prices showed a sharp correction while the index of industrial production (IIP) fell due to the 3.4% fall in manufacturing output. A Reuters poll of economists had projected retail inflation, which RBI tracks to set its interest rate policy, at 5.5% in August. RBI has set a target of 5% retail inflation by March 2017. Sowing of pulses, a key pressure point in retail inflation, saw almost a 30% increase this year to 14.4 million hectares.

Source: Mint September 12, 2016 12:43 UTC