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HindustanTimes Mon,22 Dec 2014

Retail inflation rises in July, June industrial growth slows

HT Correspondent, Hindustan Times  New Delhi, August 12, 2014
First Published: 23:29 IST(12/8/2014) | Last Updated: 01:37 IST(13/8/2014)

India’s retail inflation, a measure of actual shop-end prices that consumers pay, rose to 7.96% in July from 7.46% in June, while factory output growth slowed to 3.4% in June from 5% in the previous month, dimming chances of a sustained recovery.

Retail prices of almost all everyday products and services —from food to footwear and movie tickets to medicines — surged in July, data on Tuesday showed, signalling the government’s inability to control household inflation, partly stoked by a sharp rise in food prices.

Consumer food price inflation (CFPI), a measure of how costly the platter has become, galloped towards the worrisome double-digit mark at 9.36% in July, a sharp rise from the previous month’s 8.05% increase.

The devil of the fresh price indices lay in its detail.

On a year-on-year basis, vegetable prices grew 16.88%, while fruit prices recorded the sharpest increase at 22.48%

Prepared meals’ prices — a proxy for restaurant meal rates — rose 7.77%, primarily because of soaring vegetable prices and high rental costs.

This isn’t good news for households with the Reserve Bank of India (RBI) likely to hold interest rates at higher levels to tame inflation.

Finance minister Arun Jaitley had in June signalled the government’s intent to walk the talk on price control, announcing a string of decisions to tame inflation including a clampdown on hoarders and a hike in minimum export price of onions.

The finance minister also asked the states to immediately crack down on speculative hoarding, in anticipation of shortages in future, in to ease the supply of food items and to keep some food items outside the purview APMC.

Analysts expect inflation to remain around 8% in the coming months.

“Given the recovery in rainfall and measures taken by the government, we expect CPI inflation to hover around 7.5 – 8.0% in the coming months,” Crisil, a credit rating and research firm, said in a research report.

“The trend witnessed in prices is not comforting,” said Samiran Chakraborty, head of research, Standard Chartered Bank (India).


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