Retail inflation at 2-year high of 6.07% in July

Retail inflation shot up to nearly 2 year high of 6.07 per cent in July, well above the RBI’s comfortable level, on surge in prices of food items as demand for sugar, oil & fats and spices rose ahead of the festival season. Retail inflation, based on Consumer Price Index (CPI) was 5.77 per cent in June. In July 2015, it was at 3.69 per cent.

Inflation was highest since September 2014, when it was at 6.46 per cent. Food inflation during the month rose to 8.35 per cent, up from 7.79 per cent in June. Government has put inflation targeting at 4 per cent with a range of plus/minus 2 per cent for next five years under the new monetary policy framework agreement with the Reserve Bank. In July, sugar and confectionery inflation rose to 21.91 per cent (against 16.79 per cent in June); oil and fats to 4.96 per cent and spices to 9.04 per cent. There was an uptick in prices of cereals and products with inflation standing at 3.88 per cent, while that for eggs shot up to 9.34 per cent (against 5.51 per cent). Milk and products, also used as key ingredient for making eatables during festival, saw inflation rising to 4.13 per cent in July 

(from 3.43 per cent).  

Starting August, various festivals are celebrated in different parts of the country leading to higher sales of commodities ranging from sweets, fruits and food items. Inflation in fruits, vegetables and pulses was 3.53 per cent, 14.06 per cent and 27.53 per cent respectively. CPI inflation for urban sector was 5.39 per cent in July, while that for rural segment it was 6.66 per cent. Meanwhile, sowing of pulses has gone up by 33 per cent to 130.17 lakh hectares so far in the ongoing kharif season on good monsoon and increase in market price.

Pulses acreage (area sown) stood at 97.70 lakh hectares last season, raising hopes of higher production and softening of high retail prices once the new crop reaches markets. The government expects pulses production to increase to 20 million tonnes in the 2016-17 crop year (July-June) from 16.47 million tonnes in the previous year.