Economy

Retail Inflation Spikes To 7.44 Per Cent In July, Exceeds RBI's Accepted Limit

Bhuvan KrishnaAug 14, 2023, 06:38 PM | Updated 06:38 PM IST
Inflation on the rise. (Representative image)

Inflation on the rise. (Representative image)


India's retail inflation in July has increased to 7.44 per cent year-on-year (YoY), up from 4.87 per cent in June, according to the National Statistical Office (NSO).

The significant rise in inflation was primarily driven by a sharp increase in vegetable prices, particularly tomatoes, during the last month.

The surge in consumer price index to 7.44 per cent in July marked the first time in five months that retail inflation surpassed the upper limit of the Reserve Bank of India's (RBI's) tolerance band of 2-6 per cent.

A Reuters poll of 53 economists had predicted that headline inflation would reach 6.40 per cent on an annual basis, mainly due to the rising prices of food.

Overall, the latest data reflects a notable increase in retail inflation, primarily driven by soaring vegetable prices, particularly tomatoes.

This surge in inflation has breached the upper limit set by the RBI for the first time in five months, surpassing economists' predictions.

Inflation has become a challenge for the common man, and now there are concerns about its impact on the RBI.

The Consumer Food Price Index (CFPI) has seen a significant increase, rising from 4.49 per cent in June to 11.51 per cent.


In its August monetary policy review, the RBI decided to keep the policy rates unchanged at 6.50 per cent.

However, the forecast for CPI inflation for FY24 was revised to 5.4 per cent from 5.1 per cent.

The rise in inflation is primarily attributed to soaring vegetable prices, which are expected to continue increasing in the coming months.

India's wholesale inflation has remained in negative territory for four consecutive months.

However, there has been an increase from June's Wholesale Price Index (WPI) reading of 4.12 per cent, which was the lowest recorded since September 2015.

The RBI has expressed concerns regarding possible El Nino weather conditions and global food prices.

While the recent shock in vegetable prices may reverse quickly, it is important to closely monitor these factors in light of the skewed southwest monsoon.

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