India’s retail inflation rises to a 15-month high in July on account of high prices of vegetables and other food items

Official data released on Monday (August 14) unveiled that India experienced an uptick in retail inflation, reaching a 15-month peak in July. This escalation was primarily attributed to elevated prices of vegetables and other food items.

The National Statistical Office (NSO) data indicated that the consumer price index, a gauge of retail inflation, registered a figure of 7.44 percent in July of this year. This marked a notable rise from the preceding month’s rate of 4.87 percent and last year’s July rate of 6.71 percent.

In the realm of consumer food prices, inflation rose significantly to 11.51 percent in July, while the inflation rate for the food and beverages category surged to 10.57 percent.

Within the category of vegetables, retail inflation saw a remarkable surge to 37.34 percent in the previous month, a stark contrast to June’s deflation rate of -0.93 percent.

Price hikes were also detected in various other components of the food sector. Notably, food and beverage inflation escalated to 10.57 percent, a substantial leap from the previous month’s 4.63 percent. Cereals witnessed an inflationary trend as well, with the rate climbing to 13.04 percent from June’s 12.71 percent.

Turning attention to fuel and light, the inflation figure for July settled at 3.67 percent. Dissecting further, rural areas experienced inflation at 7.63 percent, a rise from June’s 4.72 percent, while urban areas faced an inflation rate of 7.2 percent, compared to June’s 4.96 percent.

In a poll involving 53 economists conducted by Reuters, a consensus estimate was that headline inflation would escalate to 6.40 percent on an annual basis due to mounting food prices.

This data release comes shortly after the Monetary Policy Committee meeting of the Reserve Bank of India, which indicated that inflation might persist at elevated levels even through August. However, the RBI acknowledged that while the price shock in the vegetable sector might reverse swiftly, it advised close monitoring of potential El Nino weather conditions and global food price trends against the backdrop of an uneven Southwest Monsoon.

In the context of its August monetary policy review, the RBI chose to maintain policy rates at 6.50 percent. Yet, it raised the forecast for CPI inflation for the fiscal year 2023-24 to 5.4 percent from the earlier projection of 5.1 percent.