India’s retail price pressures likely eased in July

NEW DELHI: India’s retail inflation likely eased in July due to a fall in food and fuel prices yet stayed well above the Reserve Bank of India’s (RBI) upper tolerance limit for a seventh consecutive month, according to a Reuters poll.

Food prices, which account for nearly half of the consumer price index basket, softened last month. But the bulk of the slowdown came from an easing in international prices and the lagged effect of government interventions to reduce import duties and restrictions on wheat exports.

The near-term inflation outlook remains highly uncertain as the uneven nature of this year’s monsoon and a weak rupee currency may dull the effectiveness of those government efforts to tame consumer price rises.

The Aug 2-9 Reuters poll of 48 economists showed inflation, as measured by the consumer price index, likely fell to an annual 6.78% in July, a five-month low, from 7.01% in June. Forecasts ranged from 6.40% to 7.10% for the data, which is due at 1200 GMT on Friday.

“Food and energy prices are essentially easing quite marginally, even as the rupee hit historic lows in recent weeks,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.

“It (inflation) could remain sticky over the next few months, but it’s not going to be much worse than where we are at currently.”

Wholesale price inflation was seen moderating to 14.20% in July from 15.18% in June, the poll showed.

While the lagged effect from a cut in fuel taxes helped restrain price pressures somewhat, consumer price rises are expected to persist at a strong pace in the months ahead.

India’s central bank, a relative laggard in the global tightening cycle, raised interest rates last Friday by 50 basis points to 5.4%, taking it above where it was before the pandemic, with more rate rises expected to come.