NEW DELHI: Food prices hit the brakes in July, slowing overall retail inflation down to a 9-month low of 4.17 per cent. The inflation figures released by the Central Statistics Office show that food inflation slowed to a tame 1.73 per cent during the month, driven by a sharp fall in pulse prices. The previous low for retail inflation was in October 2017, when prices rose by 3.58 per cent.
Experts note that cooling inflation in July might be enough to stave off another repo rate hike from the Reserve Bank of India (RBI) for a few months. The RBI has hiked rates twice in two months this year, and rising inflation driven by high fuel and food prices had been cited as some of the primary reasons. The next bi-monthly policy is to be announced on October 5.However, July’s numbers show that inflation in pulses and products was -8.91 per cent, with overall food inflation standing at 1.73 per cent.
While other segments did see robust price rise, with housing (8.30 per cent) and fuel and light (7.96 per cent) leading the charge, most food items fell. Vegetable prices fell by 2.19 per cent and sugar and confectioneries by 5.81 per cent, while inflation in cereals (2.92 per cent) and other food items grew marginally.
This, say economists, could prevent another rate hike in the next few months. “Sharp decline in retail inflation to 4.17 per cent, closer to RBI’s 4 per cent inflation target will give lot of comfort to monetary authorities and we expect RBI to stay in pause mode in rest of FY19,” said Devendra Pant, Chief Economist and Senior Director (Public Finance), India Ratings and Research. However, others like Aditi Nayar, Principal Economist, ICRA, also point out that the if the Rupee’s current depreciatory trend continues, it could feed ‘modestly’ into inflation in the short term.