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Retail inflation at 7.44%, above RBI tolerance level
At 15-month as high prices of vegetables and other food items spiked: Govt data
New Delhi: Retail inflation spiked to a 15-month high of 7.44 per cent in July as tomatoes, vegetables and other food items turned costlier, overshooting Reserve Bank’s comfort level for the first time in the current fiscal. The Reserve Bank of India (RBI) has the mandate to keep retail inflation in the range of 2 to 6 per cent and after remaining above the upper limit for most of the 2022-23 financial year, inflation was in the central bank’s comfort zone this fiscal till June.
Official data released on Monday showed that the Consumer Price Index (CPI) based inflation surged to 7.44 per cent in July, much higher than 4.87 per cent in June. Retail inflation stood at 6.71 per cent in July 2022 and the previous high was recorded at 7.79 per cent in April 2022. The CPI-based inflation in the food basket was at 11.51 per cent in July, significantly up from 4.55 per cent in the preceding month, and 6.69 per cent in July 2022, according to the data released by the National Statistical Office (NSO). In July, the annual inflation in the vegetables basket was at 37.44 per cent, spices at 21.63 per cent, pulses and products at 13.27 per cent, and cereals and products at 13 per cent.
The food and beverages segment together contribute about 54 per cent of the overall CPI. However, the rate of price rise in oils and fats segment declined 16.8 per cent. The inflation in meat and fish, egg and fruits was in lower single digit, as per the data. While unveiling the bi-monthly monetary policy last week, RBI Governor Shaktikanta Das had warned of a substantial increase in headline inflation in the near-term and revised upwards the inflation forecast for the second quarter to 6.2 per cent. The retail inflation was in the RBI’s comfort zone from March to June this year.
According to Aditi Nayar, Chief Economist at rating agency ICRA, given the CPI inflation print for July, the RBI’s revised forecast for inflation for Q2 FY2024 of 6.2 per cent appears to be at risk of being overshot as the vegetable price shock may not reverse adequately before the next harvest.
