Retail Inflation in India Soars to 7% in August on Rising Food Prices: Reports

In August, India’s retail inflation rose to 7% compared to 6.71% in July. On Monday, data was released that came after three months of India’s retail inflation attempting to reduce from its peak. This too happened after the Reserve Bank’s repo rate hiked in May.

Notably, the Consumer Price Index or CPI inflation continued rising above the RBI’s upper tolerance limit of 6 percent and has risen despite the central bank’s efforts to curb it.

However, food inflation is accountable for nearly half the CPI basket which accelerated to 7.62 percent in August this year, as against 6.69 percent in July. It also led to prices of cereals, pulses, vegetables, milk, pulses, and other items rising in the previous August.

Again, the nation tried to put effort by deciding to curb wheat exports and put a ban on rice exports as well. The plan should have resulted in the RBI hiking its interest rates in the coming month. The Monetary policy Committee meeting of the Reserve Bank is deemed to start on September 30.

Therefore, the RBI will decide on inflation. Currently, it has raised its repo rates by 140 basis points to 5.4 percent since May. Meanwhile, India’s industrial production in July 2022 plunged to 2.4 percent on a low base as compared to 12.3 percent in June. Notably, the manufacturing sector’s output in July 2022 grew by 3.2 percent, as per NSO data. The mining production output was evaluated at -3.3 percent. But power generation saw a growth of 2.3 percent in June 2022. The index grew by 10.0 percent between April-July 2022 when compared to a growth of 33.9 percent in the same period a year ago.

During the financial year for the first three months, Retail inflation remained above 7 percent. The RBI expects retail inflation to have an average of 6.7 percent in the year to March.

RBI governor Shaktikanta Das said, “So far as inflation is concerned, it is getting increasingly anchored. We (recently) reached the peak at 7.8 percent and thereafter, the inflation has moderated in the subsequent three prints and the latest was 6.7 percent (in July). We need to bring it down to, first, below 6 percent and then move closer to the target rate of 4 percent.”