New Delhi, August 14 (UNI) India’s retail inflation measured by consumer price index (CPI) shot up to 7.44% year-on-year in July 2023 driven primarily by high food prices.
Retail inflation print was 4.87% in June this year.
The latest inflation number is way above Reserve Bank of India’s (RBI) upper tolerance band of 6%.
The data released by Ministry of Statistics and Programme Implementation (MoSPI) on Monday showed food inflation rose to 11.51% in July this year from 4.55% in the previous month.
Commenting on July inflation number, ICRA Chief Economist Aditi Nayar said that given the CPI inflation print for July 2023, the MPC’s revised forecast for inflation for Q2 FY2024 of 6.2% appears to be at risk of being overshot, as the vegetable price shock may not reverse adequately before the next harvest.
“Moreover, rainfall has been deficient in August so far, which is likely to put upward pressure on food prices, amid the lags in kharif sowing across some crops,” she said.
The RBI in its latest forecast has projected inflation at 5.4% in FY24 with Q2 at 6.2%, Q3 at 5.7%, and Q4 at 5.2% assuming normal monsoon.
“Headline inflation projection for Q2 of 2023-24 has been revised up substantially, primarily due to the price shock from vegetables. Given the likely short-term nature of these shocks, monetary policy can look through high inflation prints caused by such shocks for some time.
The frequent incidences of recurring food price shocks, however, pose a risk to anchoring of inflation expectations, which has been underway since September 2022,” RBI Governor Shaktikanta Das said last week while making monetary policy statement.
The RBI is tasked to maintain price stability in the country and ensure retail inflation in the range of 2-6%.
The latest increase in inflation is primarily on account of high vegetable prices especially that of tomatoes which have been hurting the common man for the past several weeks. The prices of tomatoes have eased a bit but remain elevated at Rs 100-150 a kg in retail markets in many parts of the country.
The official data showed vegetable inflation in July this year was as high as 37.34%. Among various food items, ‘cereal and products’ inflation was 13.04% last month.
