India’s retail inflation swelled to 6.93 per cent in the month of July, driven by high food prices in the month. CPI (Consumer Price Index) inflation was 6.09 per cent in the previous month. The food inflation skyrocketed to 9.62 per cent in July, led by more than 15 per cent inflation in meat, fish, pulses and its products, according to the Ministry of Statistics & Programme Implementation.
Before June, the government had not released the headline retail inflation data in April and May. However, in the current release, the government said that as the various pandemic related restrictions were gradually lifted and non-essential activities started resuming operations, availability of price data has also improved.
With CPI inflation of more than 7 per cent, the maximum hit of rising inflation has been borne by the rural population. In terms of states, retail prices in Assam and West Bengal rose at the highest pace. The CPI remains above RBI’s target range mainly due to uptick in food inflation. Despite the nationwide lockdown being eased, the food inflation still remains a concern as regional lockdown still persists.
Eventually, with better monsoon and further easing of lockdown, inflation is expected to come under RBI’s target range, but until the CPI hovers above 6 per cent, RBI will remain hesitant on cutting repo rate.
Meanwhile, RBI Governor Shaktikanta Das said in the last MPC (Monetary Policy Committee) meet that a more favourable food inflation outlook may emerge as the bumper rabi harvest eases prices of cereals, especially if open market sales and public distribution offtake are expanded on the back of significantly higher procurement. In the August meeting, the MPC voted unanimously to leave the policy repo rate unchanged at 4 per cent and continue with the accommodative stance of monetary policy as long as necessary to revive growth and mitigate the impact of Covid-19, while ensuring that inflation remains within the target going forward.