The inflation based on the Consumer Price Index (CPI) stood at 6.69 percent in August. It was 3.99 percent in September last year.
The rising vegetable prices can also be seen as a key reason behind the jump in the retail inflation.
Food prices, which is a gauge to measure changes in kitchen budgets, grew 5.11 percent in September as against 2.99 percent in August.
The DA hike for government employees comes at a time when their private counterparts find it tough to convince their employers for a parity of treatment.
The Index of Industrial Production (IIP) grew 8.1 percent in October as against 4.5 percent in September on the back of mining, power and manufacturing sectors.
"For 2017-18, inflation is projected to average 4.5 per cent in the first half of the year and 5 per cent in the second half," said the RBI's first bi-monthly monetary policy statement for 2017-18.
CPI inflation is likely to average higher at 5 percent in the current fiscal on expectations of increasing pressure on food prices as well as uptick in global oil and commodity rates, says a Crisil report.
The latest price data, marginally up from January’s 3.17 percent, represents a slight pick-up in the pace of remonetisation, led by an increase in food prices.
Much of the pick up in consumer prices was likely due to higher food and transportation prices heading into the long Lunar New Year holiday, the National Bureau of Statistics said.
India‘s retail inflation rate slowed to 3.17 percent in January, from 3.41 percent in December, and lowest reading since November, 2014, confirming fears of weak demand as households, hit by a demonetisation-induced cash crunch, appears to have put off spending.
Consumer Price Index (CPI) for the month of January will be released today after market hours. A CNBC-TV18 poll estimates CPI at 3.21 percent versus 3.41 percent month-on-month. Core inflation is expected to be sticky at around 5 percent versus 4.9 percent.
India‘s factory output contracted 0.4 percent in December amid signs of faltering industrial activity because of demonetisation.
On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 percent.
All eyes will be on the Governor Urjit Patel's commentary on the inflation target and how he approaches the ultimate cpi goal of 4 percent.
Speaking to CNBC-TV18, Deepali Bhargava, Economist at Credit Suisse, said the government‘s target of containing the fiscal deficit to 3.2% of the Gross Domestic Product is the best it could have done under current circumstances.
The dollar index, which measures the greenback against six major peers, last stood at 100.47. The index recovered overnight to hit 100.73, after dipping to a seven-week low of 99.793 on Thursday.
That demonetisation would impact inflation was expected; however a dip to a two-year low was a surprise. The consumer price index (CPI) used to measure retail inflation touched 3.63 in November as compared to 4.2 percent in October and below the RBI comfort zone of 4-6 percent.
The latest price data will be crucial as it would give an idea on how the unexpected ban on Rs 500 and Rs 1000 currency notes have affected shop-end sales.
A CNBC-TV18 poll suggests that the November's CPI is seen between the range of 3.6-4 percent and food inflation is likely to come down to levels of 2.4-3.1 percent while vegetable deflation will continue and extend to over 7 percent against 5.7 percent in the October.
Expecting economic recovery from demonetisation to take a couple of months, ratings firm Crisil today lowered the country's GDP growth forecast by 100 basis points to 6.9 percent from 7.9 percent earlier for the current fiscal.
The all-items consumer price index (CPI) in October slipped 0.1 percent from a year earlier, after falling 0.2 percent in September.
However, elevated food prices mean the consumer price index, due to be released at 1200 GMT on Tuesday, is unlikely to fall below the central bank's medium-term target anytime soon.
The GST Council last week announced a tiered structure 5 percent tax on mass consumption/essential items, 12 percent and 18 percent as standard rates and 28 percent.
The GST Council has agreed on a 4-tier GST tax structure of 5, 12, 18 and 28 per cent, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.
MS Mani, Senior Director - Indirect Tax, Deloitte is satisfied with the rates that have been finalised but he says too many different types of cess for products could make it more complicated.