The headline inflation was at 8.87% for the corresponding month of the previous year. Recent stroke in inflation is due to many external and internal factors.

RBI has raised key policy rates by 11 times since March 2010 to combat stubborn inflation. Government is worried seeing latest inflation numbers as continuous rate hikes have not showed any moderation in inflation but hurt India's GDP growth figures adversely along with decline in corporate profits.

The annual rate of inflation is based on monthly Wholesale Price Index (WPI) which stands on Primary Articles (20.12%), Fuel & Power (14.91%) and Manufactured Products (64.97%).

Food inflation stood at 9.55% and Fuel inflation was at 12.55% for the week ended on August 27, year-on-year basis.

While, the IIP growth dipped sharply from 6.6% to 3.3% for the month of July 2011 on account of tepid manufacturing growth. Manufactured articles saw a dip of 2.3% as against 10% in June.

The RBI is expected to raise rates by another 25 basis points at its mid-quarter policy review on Friday on the cause of slowing growth.

GoodReturns.in