Retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank’s comfort level of 6 per cent for the seventh consecutive month. With retail inflation continuing to remain high despite a fall in prices of vegetables and edible oils, among other commodities in July, the Reserve Bank of India (RBI) might go for another rate hike in September.
RBI’s Tolerance Level:
The Consumer Price Index (CPI) based retail inflation was at 7.01 per cent in June and 5.59 per cent in July 2021. It was above 7 per cent from April to June this fiscal. According to the data released by the National Statistical Office (NSO) on Friday, food inflation in July moderated to 6.75 per cent as against 7.75 per cent in June. The retail inflation is above RBI’s upper tolerance level of 6 per cent and has remained at that level for the past seven months. Meanwhile, the moderation in retail inflation in July was mainly due to easing of vegetable and edible oil prices. In the case of ‘fuel and light’, the prices remained high. Fears of a global recession and fresh geopolitical uncertainties have led to a correction in commodity prices from the peaks seen in mid-June 2022, rating agency ICRA’s Chief Economist Aditi Nayar said.
Meanwhile, India’s factory output, measured by the Index of Industrial Production (IIP), came in at 12.3% for the month of June, compared with 19.6% reported in May, the government data has showed. The coronavirus pandemic had weighed on Industrial production since March 2020, when it had contracted 18.7%.
The manufacturing sector’s output grew 12.5% in June 2022. The mining output climbed 7.5%, and power generation increased 16.4% in June this year.