Retail inflation reached 7 per cent in August: report
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New Delhi: Retail inflation in the country rose 7 per cent in August after a three months decline. The rise is attributed to the higher food prices, and it may force the Reserve bank of India (RBI) to resort to another rate hike later this month to rein in the inflation, PTI reported.
The Consumer Price Inflation (CPI) has floated over the RBI's comfort level of 6 per cent for eight successive months. It was 6.71 per cent in July while 5.3 per cent in August 2021. RBI factors the CPI while deciding its monetary policy.
National Statistical Office (NSO) released data on Monday suggesting that inflation in food baskets touched 7.62 per cent in August, rising from 6.69 per cent in July, while it was 3.11 per cent in August 2021. The rate of price rise of vegetables, spices, footwear, and ''fuel and light'' was in excess of 10 per cent on an annual basis, the data showed. But, a contraction happened in the case of eggs and inflation in protein-rich rich' meat and fish'' remained flat in August.
Inflation was top at 7.79 per cent in April and declined to 7.04 per cent in May. It reached 7.01 in June and further declined to 6.71 in July. The government had directed RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.
The Monetary Policy Committee (MPC), headed by the RBI Governor, is scheduled from September 28 to 30. RBI had raised the short-term lending rate (repo) by 140 basis points in three tranche from May this year. The last two raises were 50 basis points each.
Chief Economist with ICRA, Aditi Nayar, opined that the sequential hardening in inflation was mostly due to a broad-based rise across the food segment, with higher inflation in cereals, pulses, milk, fruits, vegetables, and prepared meals and snacks.
She said, "We now foresee a higher likelihood that the MPC will stick to the new normal rate hike of 50 bps in its September 2022 meeting, with the headline inflation having reversed to 7 per cent in August 2022," PTI quotes.
Meanwhile, ex-RBI Executive Director and MPC member Mridul Saggar said though inflation continues to float above the comfortable rates, it is expected to decline from October.
"With some more rate hikes, the problem of negative real deposit rates can be addressed... inflation could trend down from October due to base effects, lagged impact of monetary policy tightening and expected improvement in supply chains," he said.
President of the Commodity Participants Associations of India (CPAI), Narender Wadhwa, expressed his concern about inflation hovering at 7 per cent. He said, "This figure may pressurise RBI to hike rates more aggressively to tame surging prices even at the cost of the economy," but added that the issue is a global phenomenon, and all countries are threatened.
NSO stated that the price data was gathered from selected 1,114 urban markets and 1,181 villages across all States and UTs.
The retail inflation in rural India and urban India was 7.15 per cent and 6.72 per cent, respectively. Also, the inflation was over 8 per cent in West Bengal, Gujarat and Telangana, the data suggested.
