Retail Inflation Rises To 7 Percent

The inflation print in July had come in at 6.71 per cent

Retail inflation in India, measured by the Consumer Price Index (CPI), in August rose to 7 per cent after falling for three consecutive months, data released by the Ministry of Statistics and Programme Implementation on Monday showed. The inflation print for July had come in at 6.71 per cent. This is above RBI’s 2 to 6 percent tolerance band in each month this year. This is despite significant decline in crude oil prices, which had a small impact on inflation.

However, essential crops like wheat, rice, pulses saw a significant price increase due to unfavorable weather conditions and erratic monsoon patterns. This becomes crucial as they constitute nearly half of the food consumer price index (CPI) basket. As per data, inflation in food basket was 7.62 per cent in August 2022, significantly up from 6.69 per cent in July 2022 and 3.11 per cent in August 2021. The high base effect makes inflation numbers look larger.

Erratic monsoon patterns across the country suggest more crop damages, keeping food prices elevated in the coming months, with negative seasonality kicking in for September-November and weighing on price pressures. The RBI raised its repo rate by 50 basis points (bps) in August 2022 to 5.40 per cent, taking the total rise since May this year to 140 bps. Its next policy decision is due on September 30, with expectations of a rise of fewer than 50 bps. These numbers have a cascading impact on inflation. These numbers may push the central bank into fire fighting mode like its contemporary bank in the weat.