SME TImes News Bureau | 13 Aug, 2019
Retail inflation in July fell to 3.15 percent from
3.18 per cent in June, and 4.17 per cent year ago on lower fuel prices.
The consumer food price index (CFPI) increased 2.36 per cent in July against
2.25 per cent in June and 1.30 per cent in July 2018, shows National
Statistical Office (NSO) data.
Among the non-food categories, the fuel and light segment's inflation declined
year-on-year to (-) 0.36 per cent in July.
Prices of vegetables, eggs, meat and fish pushed the retail inflation up
year-on-year. Vegetables' prices increased 2.82 per cent, meat and fish 9.05
per cent, eggs 0.57 per cent and pulses and its products 6.82 per cent.
However, at (-) 2.11 per cent decline in prices of 'sugar and confectionery'
capped the food inflation.
Prices of milk-based products rose 0.98 per cent, cereals and its products 1.31
per cent. The food and beverages sub-category recorded 2.33 per cent rise in
the month over July 2018.
The marginal dip in the CPI inflation in July was led by fuel and light, which
recorded a disinflation, even as food and core inflation inched up, said Icra's
Principal Economist Aditi Nayar.
"The incoming trends in food prices need to be cautiously watched
following the recent flood in some states, rising vegetable prices and
continued lag in kharif sowing. Moreover, unfavourable base effect is likely to
contribute to hardening of food inflation in the ongoing quarter," Nayar
"At present, we expect the CPI inflation to inch up in the next two
months, while remaining below the MPC target of 4 per cent in Q2FY20. The CPI
inflation trajectory may allow for a 15 bps rate cut in October, after monsoon
related uncertainties get resolved, especially if crude oil and other commodity
prices remain relatively soft," Nayar said.
According to Madhavi Arora, Economist, Edelweiss Securities, "The uptick
in July was backed by sequential uptick in food components, led by fruits and
vegetable. The core inflation also increased sequentially after contracting the
previous month, led by education and housing."
"We think the food inflation seasonal uptrend will likely continue in the
near-term, especially with uneven monsoon and possible flood disruption."
Joseph Thomas, Emkay Wealth Management head of research, said, "Retail
inflation remains subdued with most components indicating not much variation
compared with the earlier periods."
"But we need to make allowance for factors, like cheaper rupee, loss of
crops due to rains and the consequent effects on prices, while trying to judge
the future inflation," Thomas said.