Retail inflation, measured by Consumer Price Index (CPI) had hit a five-month high of 5 percent in June. It came in at 2.36 percent in July 2017.
India’s retail inflation fell to 4.17 percent in July, lowest in nine months, driven by cheaper food items, data released by the statistics office showed.
Retail inflation, measured by Consumer Price Index (CPI) had hit a five-month high of 5 percent in June. It came in at 2.36 percent in July 2017.
CPI is the main price gauge that the Reserve Bank of India (RBI) tracks.
On August 1, RBI revised the inflation projection for the second half of 2018-19 to 4.8 percent from 4.7 percent earlier. For the first quarter of the next financial year, the apex bank projected the inflation at 5.0 percent.
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Among factors that influenced the projection was an increase in the minimum support price (MSP) of kharif crops of at least 150 percent, volatility in global financial markets and crude oil prices as well as a significant rise in core inflation, among others.
Factoring in these inflation risks, the monetary policy committee raised the central bank's benchmark repo rate by 25 basis points to 6.5 percent in its third bi-monthly monetary policy in August, after hiking it by 25 basis points in June.
“Sharp decline in retail inflation to 4.17 percent, closer to RBI’s 4 percent inflation target will give a lot of comfort to monetary authorities and we expect RBI to stay in pause mode in rest of 2018-19,” Devendra Pant, Chief Economist at India Ratings said.
Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, grew 1.73 percent in July from 3.18 percent in June, as compared with (-) 0.29 percent a year ago.
Prices of vegetables witnessed a de-growth at (-) 2.19 percent in July, as compared with 7.80 percent in June, while fruits’ prices rose 6.98 percent in July from 10.13 percent a month ago.
Pulses continued witness deflation and contracted (-) 8.91 percent in July from (-) 10.87 percent a month ago. Similarly, sugar prices fell (-) 5.11 percent in July from (-) 7.11 percent in June.
Inflation from pan, tobacco and other intoxicants fell to 6.34 percent in June from 8.05 percent a month ago, while
“Surprises from fruit, vegetables, clothing and footwear, and pan, tobacco, and intoxicants contributed to a substantial correction in the headline CPI inflation in July 2018…Despite the truckers’ strike, food inflation eased considerably in July 2018, benefitting from the base effect,” Aditi Nayar, Principal Economist at ICRA said.
Transportation cost remained saw a marginal growth at 6.55 percent in July from 6.18 percent a month ago, mainly due to higher fuel cost.
According to India Ratings, core-inflation--non-food, non-fuel inflation--moderated to four month low at 5.70 percent.
“However, this is still higher than the core-core inflation observed during March 2016 to March 2018, suggesting demand pressure in the economy,” Pant said.