Retail Inflation Surges to 15-Month High

The retail inflation rate in India breached the Reserve Bank of India's upper tolerance limit, reaching a 15-month high of 7.44 per cent in July, driven by a surge in prices of vegetables, cereals, and pulses. Economists predict that this could prompt the central bank to increase interest rates sooner than expected. Meanwhile, wholesale price inflation remained in the negative territory for the fourth consecutive month, easing due to decreasing fuel prices.

Key Takeaways:

• The retail inflation rate jumped to 7.44 per cent in July, breaching the Reserve Bank of India's upper tolerance limit of 6 per cent.
• Food inflation rose at a staggering pace of 11.51 per cent in July, with a sharp increase in prices of vegetables, cereals, and pulses.
• Vegetable inflation rose by 37.34 per cent in July, with prices of commonly used vegetables like tomatoes, onions, peas, brinjal, garlic, and ginger more than doubling in the last few months.
• Core retail inflation is estimated to be between 4.9 per cent and 5.1 per cent for the month.
• The central bank's monetary policy committee (MPC) had emphasized being vigilant and ready to act to prevent inflation persistence, with a rate hike unlikely unless inflation persists above 6 per cent for at least two quarters.

Statistics:

• Retail inflation rate: 7.44 per cent (July)
• Food inflation: 11.51 per cent (July)
• Vegetable inflation: 37.34 per cent (July)
• Core retail inflation: 4.9-5.1 per cent (estimated for July)
• Wholesale price inflation: (-) 1.36 per cent (July)
• Cereal inflation: 13.04 per cent (July)

Sources:

• Sunil Kumar Sinha, senior director and principal economist, India Ratings and Research
• Dipti Deshpande, principal economist, Crisil
• Aditi Nayar, chief economist, Icra
• ABP Private Limited (2023) distributed by Contify.com