India’s retail inflation for July rises 6.93% as food prices climb nearly 10%
The consumer price index in July rose 6.9%, while food items became nearly 10% costlier, data from the ministry of statistics showed Thursday.Updated: Aug 13, 2020 19:50 IST
Food prices rose sharply in July, leading to overall inflation firming up, as weekend lockdowns to contain the pandemic in many cities and widespread flooding clogged supply lines.
The consumer-price index (CPI) in July rose 6.9% from a year ago, while food items, as measured by the index, became nearly 10% costlier, data from the ministry of statistics and programme implementation showed Thursday. Compared to July, overall retail prices had risen 6.2% in June, while food prices in the previous month rose 8.7%.
The CPI measures what households pay for everyday items, including food, fuel, clothing, housing and electricity. Retail inflation in July increased for the fourth straight month, a touch above the Reserve Bank’s acceptable limit of 4 (+/2)%.
RBI governor Shaktikanta Das, after the central bank’s monetary policy committee (MPC) meeting on August 6, pointed to the possibility of elevated prices. The MPC is the panel that reviews the country’s monetary policy and fixes interest rates charged by the banks to borrowers.
“The MPC expects headline inflation to remain elevated in Q2:2020-21, but likely to ease in H2:2020-21, aided by favourable base effects,” he had said on August 6. Q2 refers to quarter two (July to Sep) of a financial year, while H2 refers to the last six months of the year.
Low inflation helps the MPC to bring down interest rates to encourage borrowing by businesses in the hope of spurring growth.
High inflation despite collapsing growth is a worry for economists. “This is a stagflation like situation, marked by increasing prices and dipping growth. It will thwart the central bank from lowering interests anytime soon,” said Abhishek Agrawal, an economist with Comtrade, a commodities trading firm.
Rural inflation in July was higher than in urban India, at 7.04%, compared 6.8% in urban parts of the country, the data showed.
Apart from food articles, consumers paid higher prices for transportation services, the data showed.
Vegetable price in July rose a sharply by 11.29% from 4% in the previous month, the data show. Inflation for fruits stood at 0.13% compared to a 0.3% rise in June, while pulses prices rose by 15.92% in July compared to 17.6% in the previous month.
“What we are seeing are the effects of disrupted supply lines because of two reasons. One, heavy rains in states such as Maharashtra, Bihar and Madhya Pradesh have held up food trucks and, secondly, food cargo movement has been still restricted in many cities due to weekend lockdowns,” said Arvind Mahaple, the proprietor of Mahaple Merchants, a fruits trading firm, in Nashik.
The CPI measures a basket of six categories of retail items most consumers buy. Food and beverages, with a 45.85% weightage, is the largest category The rise in food prices to 9.62% in July will relatively hurt poorer households MORE because the poor, as a proportion of their monthly budgets, tend to spend more on food.
Inflation in transport and communication category rose 9.95% in July from 8.3% in June.
The National Statistical Office collects price data from 1114 urban markets and 1181 villages through personal surveys by field staff. “As the various pandemic related restrictions were gradually lifted and non-essential activities started resuming operations, availability of price data has also improved. NSO collected prices from 1054 (95%) urban markets and 1089 (92%) villages during the month of July,” a government statement said.