In June, the rate saw an uptick for the first time in five months as it accelerated to 5.08 per cent on an annual basis due to an increase in food prices. Retail inflation rate in July 2023 stood at 7.44 per cent.
A Reuters poll of 36 economists had estimated the number to come down sharply to 3.65 per cent.
Headline inflation has stayed within the Reserve Bank of India’s (RBI) tolerance range of 2-6 per cent. However, it has not been ‘durably’ around the median target of 4 per cent, which is important for the RBI‘s plans to cut interest rates this year.
Food inflation rate, which accounts for about half of the consumer price index (CPI) basket, slowed to 5.42 per cent in July, as compared to 9.36 per cent in June and 11.51 per cent in July 2023.
Households see inflation in India rising by 20 basis points each over the next three months and year, according to the households’ inflation expectations survey released by the Reserve Bank of India on its website Thursday.
Das & Co on inflation
RBI during the recently-concluded Monetary Policy Committee (MPC) meeting had left its inflation forecast for this fiscal year unchanged at 4.5 per cent even amid caution on food price trajectory that may hurt core inflation and intensifying geopolitical tensions which pose a threat to any comfort on crude prices easing to multi-month lows.The MPC voted to leave the rates unchanged at 6.5 per cent.
“Under the current monetary policy setting, inflation and growth are evolving in a balanced manner and overall macroeconomic conditions are stable. Growth remains resilient, inflation has been trending downward and we have made progress in achieving price stability; but we have more distance to cover,” RBI Governor Shaktikanta Das said.
“The progress towards our goal of price stability has been uneven due to large and persistent supply side shocks, especially in food items. We, therefore, need to remain vigilant to ensure that inflation moves sustainably towards the target, while supporting growth. This approach would be net positive for sustained high growth.”
Das said the MPC may look through high food inflation if it is transitory but in an environment of persisting high food inflation, as we are experiencing now, the MPC can not afford to do so.