August retail food inflation up to 2.20% from 2.15% in July

Retail inflation fell by 3 basis points (bps) to 3.66 per cent in August due to a slower rate of price rise in vegetables, fruits and protein items, except pulses, which may prompt the Reserve Bank to cut rates at its September 29 policy meet. Food inflation measured on Consumer Food Price Index during the month, however, rose slightly in August at 2.20 per cent as against 2.15 per cent in July 2015, government data showed on Monday. Besides, the rate of price increase in vegetables was recorded at a negative 6.36 per cent during the month under review, while fruits were cheaper with an inflation print of 0.99 per cent.

In August 2014, retail inflation was at 7.03 per cent. The Consumer Price Index (CPI) based retail inflation for July 2015 was revised downwards to 3.69 per cent from 3.78 per cent, according to government data. However, prices of protein rich pulses continued to rise at a higher rate with inflation for ‘pulses and products’ category remaining firm at 25.76 per cent. However, among other <g data-gr-id="38">protein rich</g> items such as meat and fish, the rate of price rise was slower at 5.79 per cent. Likewise, milk and its products were also cheaper in August than a year ago level at an inflation figure of 5.33 per cent.

Among others in the list, inflation in eggs slowed to 2.3 per cent, however, the rate of price rise for ‘cereals and products’ was faster with an inflation at 1.22 per cent. As per the data from the Ministry of Statistics and Programme Implementation (MOSPI), inflation in sugar and confectionery category slowed further to (-) 13.33 per cent; 8.37 per cent for spices and 4.43 per cent for non-alcoholic beverages.

“We definitely expect one rate cut in September whether the Fed hikes rates or not. I think a lot of things have been factored in. I am not sure about just one cut coming from here. The way the world is moving and if you look at the similar kind of trajectory where the world is going now, we can definitely expect at least one or may be two more cuts,” said Jayesh Mehta, Managing Director & Country Treasurer, Bank of America.

Meanwhile, India Inc on Monday said that the Reserve Bank of India (RBI) must cut the benchmark rate to lower the cost of finance and revive consumer demand, which is crucial for supplementing economic growth. “Given that CPI inflation has also been declining, RBI needs to reduce interest rates sharply to drive a recovery in demand,” CII Director General Chandrajit Banerjee said. “CII expects RBI to reduce interest rates by 50 basis points in the forthcoming policy with statements supporting further easing in the near future.” 

The deflationary trend continued for the 10th month in a row, with inflation plunging to a historic low of (-)4.95 per cent in August on cheaper fuel and vegetables, putting pressure on RBI to cut interest rate. 

“Under the present circumstances, it would be most appropriate for RBI to give weight to growth considerations and announce a deeper cut in the policy rate. We hope RBI and the banking community will coherently work towards lowering of lending rates,” Ficci President Jyotsna Suri said.

Imported pulses will start arriving at various ports in the country from September 23, which will boost domestic supply and help control retail prices that have shot up to Rs 150 per kg. State-owned MMTC, which is importing tur and urad dals on behalf of the government, has been directed to float <g data-gr-id="99">local</g> tender for milling imported pulses as state governments have expressed inability to do so. 

Deflationary trend continued for 10th month in a row with WPI inflation plunging to a historic low of (-)4.95 per cent in August on cheaper commodities, a development that may prompt RBI to cut rates later this month. But for onion and pulses, wholesale prices of most of the food articles either declined or showed a very marginal increase during the month. Economic Affairs Secretary Shaktikanta Das said there has been a considerable improvement in the price situation. “RBI will take a considered call on the issue. There is no divergence in perception. The government and RBI are working together. Taking into account the overall factors, RBI will take a considered call,” he said. The Wholesale Price Index-based inflation was (-)4.05 per cent in July.