Retail inflation up to 2.36% in July

NEW DELHI: India’s retail price inflation reversed its downward momentum and accelerated to 2.36% in July as vegetable prices shot up, reducing the probability of any near term chance of an interest rate cut by the central bank.

Consumer price index (CPI) based inflation stood at 1.46% a month ago. Vegetable prices rose 3.57% in July from a contraction of 16.53% in June, data released by Central Statistics Office on Monday showed.

Data separately released on Monday by the Department of Industrial Policy and Promotion showed India’s wholesale price index -based inflation increased to 1.88% in July, led by increases in food and mineral prices, compared to a 0.90% rise a month ago.

Inflation for housing (4.98%) and fuel and light (4.86%) segments also accelerated in July, reflecting the government’s decision to implement the recommen- dations of the 7th Pay Commission for central government employees regarding allowances and hike in fuel prices. The government’s decision to hike cooking gas prices by ₹4 each month till such subsidy is eliminated may further fuel retail inflation.

“As the favourable base effect unwinds, vegetable prices record a seasonal hardening and the impact of HRA (increased in the 7th pay commission) pushes up housing inflation further, we expect CPI inflation to ramp up over the next few months, and cross 4% by October 2017,” said Aditi Nayar, principal economist at ICRA Ratings.

The RBI, which cut its key policy rate by 0.25% in August retained its neutral policy stance citing uncertainty on the future trajectory of inflation due to several uncertainties. Meanwhile, export grew 3.94% on a yearly basis to $22.54 billion in July on account of rise in shipments of petroleum, marine products, data released by the commerce ministry showed on Monday.