Inflation eases to 5.59% in July
NEW DELHI: Retail inflation in India eased in July after holding above 6% for two months in a row, helped by improving supplies following the lifting of pandemic restrictions, and the central government said it would take all necessary steps to contain rising prices.
Consumer prices rose 5.59% in July from the same month last year, lower than June’s 6.26% annual inflation rate, data released by the ministry of statistics showed on Thursday.
Food prices, which account for nearly half of the inflation basket, rose 3.96% year-on-year in July from 5.15% a month before.
Retail fuel and electricity prices rose 12.38% in July while transport costs climbed 10.54% from a year ago, the data showed. However, the prices of cereals, vegetables and sugar fell in July. Core inflation, excluding volatile food and fuel costs, was estimated at between 5.94% and 6.1%, according to three economists, compared with 6.1% to 6.2% in June.
NEW DELHI: India’s retail inflation eased to 5.59% in July against 6.26% a month ago, bringing some sense of relief to the central bank. Inflation had remained above 6%--the upper tolerance level of the Reserve bank of India--in May and June.
Data released by the statistics office showed food inflation eased to 3.96% in July even though inflation for protein items such as egg, oils and fats remained elevated. Fuel inflation stood at 12.38% while services inflation rose by 6.71% during July.
The central bank on Friday kept interest rates on hold for the seventh straight time to support the economy reeling from the pandemic even as a split appeared among monetary panel members over retaining the easy-money policy amid an inflation surge.
The monetary policy committee (MPC) kept the repo rate, or the rate at which banks borrow from the Reserve Bank of India (RBI), unchanged at 4%. The MPC members voted 5-1 to continue with the accommodative policy stance as long as necessary to revive and sustain growth on a durable basis. Only Jayant Varma expressed reservations on the policy stance, the details of which will be clear once the minutes of the meeting are published.
As expected, RBI raised the inflation forecast for this fiscal to an average of 5.7%, higher than the earlier forecast of 5.1%. RBI noted that the current inflationary trend can be looked through as it is driven by “exogenous and largely temporary supply shocks”.
Despite the spike in inflation, growth continues to be a priority for the central bank. RBI retained the growth forecast for this fiscal at 9.5% amid fears of a third wave of the pandemic. Das noted that domestic economic activity has started normalizing, with the ebbing of the second wave and the phased reopening of the economy.