NEW DELHI: Surge in vegetable prices, led by tomato, pushed the retail inflation to a 15-month high of 7.44% in July, according to data released by the Ministry of Statistics and Programme Implementation (Mospi) on Monday.
The July inflation number beat most estimates by 80-90 basis points. With this, the retail inflation went past the RBI’s upper tolerance level of 6% after four months. The jump in inflation was primarily caused by a substantial increase in vegetable prices, which saw a 38% month-on-month and 37% year-on-year increase.
The Consumer Food Price Index rose 6.7% month-on-month in July. Rise in prices was also seen in other food items such as cereals, pulses and milk. Inflation in most other categories barring food and beverages, and pan, tobacco and intoxicants, eased in July 2023 compared to June 2023.
Anticipating a significant inflation rise in July, the Reserve Bank of India (RBI) adjusted its CPI inflation forecast for July-September by 100 basis points to 6.2%. Despite this adjustment, the Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 6.5% for the third consecutive meeting.
“CPI inflation soared to a much sharper-than-expected at 7.4% in July 2023 from 4.9% in June 2023, owing to vegetables, as well as some other food items like pulses, spices and cereals. excluding vegetables, the increase in CPI inflation print was relatively tolerable, to 5.4% in July 2023 from 5.2% in the previous month,” Aditi Nayar, Chief Economist with ICRA Ltd, said. As per Gaura Sengupta, an economist at IDFC Bank, nearly 71% of food basket saw inflation higher than 6% in July as against 59% in June.
As per experts, the current bout of inflation post Russia-Ukraine war has been characterised by higher rural inflation than urban inflation, mainly in the case of cereals and pulses. “This trend remains abated, which is negative from a rural economic health perspective. It is important to support rural economic activity and stimulate consumer demand in these parts of the country, as India emerges from Covid-19,” said Debopam Chaudhary, chief economist, Piramal Enterprises.
High vegetable prices push up inflation
Jump in inflation was mainly caused by rise in vegetable prices, which saw 38% month-on-month and 37% year-on-year jump. Consumer Food Price Index rose 6.7% month-on-month in July. Rise in prices was seen in other food items like cereals, pulses and milk. Inflation in most other categories barring food and beverages, and pan, tobacco and intoxicants eased in July 2023
