New Delhi: Retail inflation in India eased to 6.71 percent in July, the lowest since March, but above the upper limit of the Reserve Bank of India’s target range for seven straight months.
The data, released by the National Statistical Office (NSO) on Friday, showed that the Consumer Price Index (CPI)-based inflation eased marginally to 6.71 percent in July from 7.01 percent in the previous month, while the Index of Industrial Production (IIP) grew 12.3 percent in June compared to 19.6 percent in May.
In June, reports said on Friday that inflation stayed over 7 percent for the third month in a row, at 7.01 percent from a year ago.
In July, easing food prices, which account for nearly half of the consumer price index basket, and reduced fuel costs helped lower the pace of increase in price pressures.
According to the data, food inflation in July 2022 was moderated to 6.75 percent, compared to 7.75 percent in June.
Recession fears, which lowered global commodity prices, pulled down prices. The international oil benchmark, Brent Crude, is now down about 9 percent for the month, hitting the pre-Ukraine crisis lows and below USD 100 a barrel.
This slowdown is because of the lagged reflection of the fuel tax cut. The government’s interventions to reduce import duties and restrictions on wheat exports also lowered prices.
However, consumer price rises are expected to persist at a strong pace in the months ahead, with the RBI’s projections pointing to inflation above its upper end of the 2 to 6 percent target range.
The near-term inflation outlook is still quite uncertain because the government’s efforts to rein in consumer price increases may be less effective because of the unevenness of this year’s rainfall.
The government has asked the RBI to keep retail inflation between 2 to 6 percent.
To check inflation, the RBI hiked its key repo rate for the first time in four years by 40 basis points (bps) in an off-cycle meeting in May, then a 50 basis points increase in June, and another larger-than-predicted 50 basis points this month, bringing the repo rate to 5.40 percent. It made the RBI’s lending to commercial banks expensive, which shows the interest rates and EMIs are set to rise.
In July, the RBI kept its inflation projection for the current financial year unchanged at 6.7 percent and said retail inflation would remain above the upper tolerance level of 6 percent through the first three quarters of 2022-23.
Recently, the RBI’s Monetary Policy Committee (MPC) noted that the “spill-overs from geopolitical shocks are imparting considerable uncertainty to the inflation trajectory. More recently, food and metal prices have come off their peaks. International crude oil prices have eased in recent weeks but remain elevated and volatile on supply concerns even as the global demand outlook is weakening.”
The government is striving to control price-rise as key factors are favorable again. India is “set to be the world’s fastest-growing economy this year and the next,” an official said.
Separately, the National Statistical Office (NSO) data on Friday showed industrial production rose 12.3 percent in June 2022 from a year ago, compared with a 19.6 percent increase in May.
(VP)