India’s July Retail Inflation Rises to 4.45% on Elevated Food Prices; 9th Consecutive Monthly Hike
The government, however, has tasked the Reserve Bank of India (RBI), ensuring that CPI should remain at 4 per cent with a margin of 2 per cent on either side.
New Delhi:Remaining above the central bank’s target, India’s headline retail inflation continued to rise for the ninth month in a row to 4.45 per cent in July, up from 4.38 per cent in previous month. With food prices remaining elevated in the month, the inflation also stood higher in rural India, while urban areas registered a lower rate across the country, the government said on Wednesday.
As per the data released by the National Statistics Office (NSO), the consumer price index (CPI) based retail inflation was 4.38 per cent in June, slightly lower than that of the July readings, while the food inflation in July rose to 5.52 per cent from 5.32 per cent in the preceding month.
The government, however, has tasked the Reserve Bank of India (RBI), ensuring that CPI should remain at 4 per cent with a margin of 2 per cent on either side. The RBI had kept the short-term lending rate unchanged earlier this month, citing inflationary concerns. With the July data, experts, however, believe that the central bank may raise its key interest rates later this year.As per the NSO data, price pressures continued to be significantly stronger in rural India. “Rural headline inflation stood at 4.84 percent in July, up from 4.74 percent in June, while urban inflation, meanwhile, edged up to 3.96 percent from 3.93 percent. Similarly, food prices remained the primary driver of the increase,” the data showed.
“Inflation based on the consumer food price index rose to 5.52 percent in July from 5.32 percent in June. Rural food inflation increased to 5.79 percent, compared with 5.05 percent in urban areas. Vegetable prices, however, provided some relief with tomato prices declining to 4.59 percent from a year earlier in July, while potato prices fell to 16.56 percent and lady’s finger 5.52 percent,” it added.
The NSO further said that precious metals continued to record some of the sharpest price increases. “Silver jewellery prices were 109.84 percent higher than a year earlier, while gold, diamond and platinum jewellery recorded inflation of 32.98 percent,” it said.
On state-wise comparison, the headline inflation also varied sharply across states in India. “Telangana recorded the highest combined inflation among the major states at 6.32 percent in July, followed by Andhra Pradesh at 5.72 percent and Tamil Nadu at 5.44 percent. While it was substantially lower in several north-eastern states with Mizoram recorded 1.84 percent followed by Meghalaya 2.31 percent and Tripura 2.32 percent,” it added.
Economists and analysts, however, expect that inflation is expected to edge up in the coming months. “The rise in retail inflation during July was largely driven by anticipated supply-side factors, including tomatoes and onions, transport costs, cooking fuel and restaurant prices. These appear to be transitory in nature rather than reflective of stronger underlying demand,” said Debopam Chaudhuri, chief economist, Piramal Group.
“If geopolitical tensions in West Asia continue to ease over the coming weeks, there is a reasonable probability that retail inflation could undershoot the Reserve Bank of India projected peak of 5.9 per cent for the December 2026 quarter. Such an outcome would support a more favourable interest rate environment, helping sustain consumer demand while also improving the viability of leveraged private sector capex,” Chaudhuri added.
