Inflation dips to 9.2% in July

India's inflation rate in July dipped marginally to 9.22% from 9.44% in the previous month but economists warned that it was unlikely to prevent the Reserve Bank of India (RBI) from raising interest rates in its mid-quarter monetary policy review next month. HT reports.

India's inflation rate in July dipped marginally to 9.22% from 9.44% in the previous month but economists warned that it was unlikely to prevent the Reserve Bank of India (RBI) from raising interest rates in its mid-quarter monetary policy review next month.

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Food inflation slowed to a five-month low of 8.2% as price pressures in grains - cereals and pulses - were relatively weak by but those for fruits, vegetables, milk and egg, meat and fish categories continued to remain at elevated levels.

Manufactured products' inflation edged up to 7.5% primarily because of the knock-on effects of a hike in diesel prices that cascaded through the economy.

Finance minister Pranab Mukherjee said a good monsoon will help ease prices.

"I am quite confident that good monsoon will ensure moderation of inflationary pressure," Mukherjee said. "The measures taken to remove supply constraints in some of the agricultural products and the monetary policy adopted by the RBI will help bring about moderation of inflationary pressure and at the same time it will ensure the average ratio of liquidity of the legitimate credit requirement of the industry and other sectors."

The central bank has raised the repo rate - the rate at which banks borrow from the RBI - by 11 times in the past 17 months to cool prices."

A higher repo raises banks' borrowing costs, which in turn would raise interest rate on final home, auto and corporate loans

"Overall, the inflation indicators will still favour further (monetary) tightening," said Rajeev Malik, senior economists at broking and research firm CLSA.