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Retail inflation down, vegetable prices still pinching

business Updated: Aug 22, 2012 01:24 IST
HT Correspondent
HT Correspondent
Hindustan Times
inflation

India’s overall consumer price inflation may have grown at a marginally slower 9.86% in July, down from 9.93% in June, but soaring food prices continue to knock up the cost-of-living sharply.

With rains playing truant, it could get even worse.

On a year-on-year basis, vegetable prices clocked the sharpest rise at 27.3%, while that of milk and allied products shot up 11.9%. Oil and fats rose 17.4%. Non-alcoholic beverages — like your can of soft drink — rose 9.3%

Prepared meals’ prices — a proxy for restaurant rates — rose 9%, partly because of soaring vegetable prices. http://www.hindustantimes.com/Images/Popup/2012/8/22-08-12-biz-05.jpg

Lower food output, a possibility if rains don’t pick up in the next fortnight — the crucial sowing period — could fan prices further, adding to the woes of a worried government, already battling sliding growth, a heavy debt burden and growing criticism of policy paralysis.

In cities, retail inflation — a more realistic index because it captures shop-end prices — was even higher at 10.44%, compared to 9.74% in rural India.

Food inflation inched higher to 11.5% in July from 10.8% in June due to rising prices of cereals and pulses. This contrasts with the fall in food inflation in the wholesale price index (WPI) and suggests that lower wholesale prices may not be translating into lower consumer prices.

Economists believe that the moderation in July CPI inflation — like the fall in July WPI inflation — may not be sustainable with high food prices, which account for 43% of the CPI basket.

“Food prices will likely continue to rise because of poor rainfall during the monsoon season,” said Sonal Varma, economist at research firm Nomura. “Besides, fuel inflation remains suppressed due to an incomplete pass-through of fuel prices to end users, and any hike in administered prices in the coming months will increase inflation.”

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