At 3.36% in August, the consumer inflation rate remains moderate, but retail prices are seen rising as demand picks up ahead of the festive season and food prices spike because of drought-like situation in many states.
"This latest rise in inflation - to just under 3% - is not a great surprise".
Overall food inflation in August also moved up, reversing the deflationary trend, to 1.52 per cent, government data showed today.
"Rising prices for clothing and motor fuels were the main contributors to the increase in the rate between July and August", the ONS said.
"On balance, we think that Brexit uncertainty will continue to trump inflation concerns, and rates will remain on hold for now - but the risks are shifting". Judging by last month's vote, two members of the Committee are already minted to support an immediate rise in interest rates.
Industrial output contracted 0.2 percent in June.
Retail food inflation, which accounts for about 54%of the consumer price index, rose 1.52%in August after prices contracted in the previous three months. Inflation is now well above the bank's target of 2%, worsening the dilemma for rate-setters who are anxious about raising rates amid the economic uncertainty.
It also make its harder to save as many cash bank accounts will not beat inflation.
For the end of 2018, BNR estimates an inflation rate of 3.2 pct, from 3.1 pct previously, and for the end of the first semestre of 2019 an inflation rate of 3.5 pct is expected. In fact, it will likely grow 7.3 percent in 2017-18, suggested a recent Reuters poll.
The Consumer Price Index including owner-occupiers' housing costs (CPIH) was 2.7% in August, up from 2.6% the month before.
However, economic growth is expected to pick up in the coming quarters and India might get its "fastest-growing major economy" title back.
India's industrial production increased 1.2 percent year-on-year in July, which was in line with the market consensus. With very well-developed and complex supply chains, it can take a number of years for a decline in the exchange rate, which raises import prices, to feed through fully to consumers.
Output prices, the so-called factory gate inflation that is the cost of manufactured goods before profit mark-up is added, rose to 3.4% annually in August from 3.2% in July.