Retail inflation eases to 6.71% in July on lower vegetable, edible oil prices

In June, retail inflation was at 7.01 per cent and it stood at 5.59 per cent in July 2021

Retail inflation softened to 6.71% in July due to moderation in food prices but remained above the Reserve Bank’s comfort level of 6% 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.

The Consumer Price Index (CPI) based retail inflation was at 7.01% in June and 5.59% in July 2021. It was above 7% 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% as against 7.75% in June.

Meanwhile, the moderation in retail inflation in July was mainly due to the easing of vegetable and edible oil prices. In the case of ‘fuel and light’, the prices remained high.

“CPI headline inflation for July has moderated in line with our expectations led largely by food inflation while the core inflation remains elevated and sticky. The coming few readings are
expected to be a tad above 7% with inflation likely to hover above RBI’s upper threshold limit of 6% until January 2023. We expect repo rate at 6% by end of 2022 followed by a pause and a shift to neutral policy stance,” Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said.

According to Vivek Rathi, Director-Research, Knight Frank India, headline inflation softened to 6.7% in July primarily due to softening of food prices. “The increase in fuel inflation despite measures to curb domestic petrol and diesel prices is a concerning factor,” he said.

(With PTI inputs)