July retail inflation hardens to 2.36% on food, fuel price spike

The annual rate of inflation based on wholesale prices went up in July 2017 to 1.88 per cent from 0.90 per cent in June. On a year-on-year (YoY) basis, the WPI had risen by 0.63 per cent in July 2016.

Similarly, July's retail or CPI-based inflation edged up by 2.36 per cent from 1.46 per cent in June. However, on a YoY basis, it was lower than the 6.07 per cent CPI rate reported for the corresponding month of last year.

The upward trend in both the inflation gauges was led by a surge in food and fuel prices.

The wholesale inflation for food articles rose massively by 2.15 per cent from a deceleration of (-)3.47 per cent during June 2017 and a rise of eight per cent in July 2017.

On a sequential basis, the Consumer Food Price Index (CFPI) rose by 3.21 per cent during the month under review when compared to June 2017.

The data on a YoY basis, showed that cereals prices in July edged higher by 3.97 per cent, and meat and fish recorded a sharp rise of 3.19 per cent.

Food and beverages during the month under consideration recorded a marginal rise of 0.43 per cent over the same month last year.

Among non-food categories, 'fuel and light' segment's inflation rate accelerated to 4.86 per cent in July.

The rural CPI YoY ruled higher at 2.41 per cent, whereas in urban areas it was at 2.17 per cent. In terms of food prices, the wholesale inflation rate for onion was lower year-on-year by (-)9.50 per cent, while that for potatoes plunged by (-)42.45 per cent.

In contrast, the overall, vegetable prices in July rose by 21.95 per cent, against a rise of 12.59 per cent in the same month a year ago.

As per the data, on YoY basis, wheat became cheaper by (-)1.16 per cent, while protein-based food items such as eggs, meat and fish became dearer by 3.30 per cent. The prices of major group under the WPI like primary articles edged higher by 0.46 per cent from a decline of (-)3.86 per cent in June 2017. However, the acceleration was slower on a YoY basis, as it had risen by 6.03 per cent in July 2016.

Other major WPI group -- manufactured products -- which comprise nearly 64.23 per cent of the index, rose by 2.18 per cent. The sub-category of manufactured food products registered a rise of 2.09 per cent.

The fuel and power price major index's inflation accelerated by 4.37 per cent.

Segment-wise, the price of high-speed diesel rose by 5.49 per cent during July, while that for petrol climbed by 9.60 per cent, and for LPG by 0.28 per cent.

Expressing its concern over the rise in inflation trend for July, India Inc urged the government to "check and address" products' prices which are of national importance.

"Continuous increase in the prices of petrol and high speed diesel due to rise in prices of crude oil globally have to be taken care of by policymakers since it may have impact on import bills and subsequent impact on exchange rates. And it may have negative impact on input prices for the industry which has already started to feel the pressure on its profitability," said Associated Chambers of Commerce and Industry of India (Assocham) Secretary General D.S. Rawat.

"It is clear from the recent global economic policy announcements that interest rates are going to increase in future, as such policymakers must take corrective action to address the situation of rising interest rates coupled with the situation of twin balance sheet problems in India, limited capacity of private sector to invest and existing unutilised capacity of industries to produce," added Rawat.

According to Pankaj Patel, President of the Federation of Indian Chambers of Commerce and Industry (Ficci), wholesale based prices have edged up in July on the back of a sharp increase noted in vegetable prices.

"However, the broad conditions for agri-prices remain conducive given normal monsoon in most parts of the country and stable global commodity prices. This outlook is also corroborated in the second part of the Economic Survey released last week.

"Given the trend and outlook for inflation, we see clear space for a more accommodative stance in the monetary policy. This is all the more important given the state of industrial sector where growth is anaemic... We look forward to a further cut in the policy rate by the RBI at the earliest," he added.