Retail inflation rises to 7 per cent in Augustv
Retail
inflation rises to 7 per cent in August
Why
is it in news?
• Inflation based on
the Retail Consumer Price Index (CPI) has reached a level of 7.0% in August.
• This rate was 6.71%
in July 22. According to the Finance Ministry, inflation has registered a
marginal increase from 6.71% in July (7.0%) in August.
• This increase is due
to adverse base effect and increase in food and fuel prices. Which are
considered to be the transient components of CPI inflation.
• Retail inflation in
every month so far this year has remained above the RBI's (Reserve Bank of
India) tolerance band between 2-6 levels.
Introduction
• Inflation refers to
the decline in the purchasing power of a currency over time. It also shows a
steady increase in the general level of prices.
• It is calculated on
price indices, Wholesale Price Index (WPI) and Consumer Price Index (CPI).
Highlights
• There was a decline
in retail inflation in the last three months, which has now increased once
again. At the same time, it is also being said that further increase can be
recorded in the coming months.
• The Finance Ministry
said on this increase that core inflation is calculated excluding the transient
component of CPI.
• In August 2022, the
rate of 'Food and Beverage' and Fuel etc. was recorded at 5.9 percent, which is
below the tolerance limit of 6 percent for the fourth consecutive month.
• The government has
said that the Business Inflation Expectations Survey of IIM-Ahmedabad in July
2022 has come down by 34 bps to 4.83% from 5.17% in June. After 17 months, the
inflation expectation has come down to below 5%.
Reasons
for rising retail inflation:
Monsoon: Irregular
monsoon in the country can be one of the reasons for the rise in retail
inflation. Due to which this level of retail inflation may remain in the coming
times as well. Food inflation in July is still lower than its peak in April of
the current year, despite an uncertain monsoon and negative impact on vegetable
prices.
Global inflationary
pressures: Due to global inflationary pressures, the fall in retail inflation
is not as expected. But with global inflationary pressures, inflation
expectations in India with stable core inflation remain high.
RBI's
side:
• India's central bank
had increased key policy rates by 140 basis points in May-August. Due to which
the cost of borrowing has come down. The next policy decision of RBI is to be
taken on 30 September. The central bank expects inflation to average 6.7% till
March.
• Retail inflation has
been above 7% in the first three months of the current financial year. Compared
to other retail inflation figures, the bond yields of the Government of India
were marginally higher today. It has ended at 7.1811% this time as compared to
7.1699% in the previous session.
What
did the Finance Ministry say?
• The Finance Ministry
has said that the tariffs on imported goods have been rationalized from time to
time to keep the prices of edible oils and pulses low, in order to bring down
retail inflation and also to check stockpiling. The limit has also been set.
• Inflation in oil,
pulses and other products has come down.
• According to the
Finance Ministry, the prices of key inputs such as iron ore and steel have
declined in the global markets. Thereby, the cost escalation in consumer goods
along with the measures taken by the government to rationalize the tariff
structure of inputs to augment domestic supply has helped in keeping inflation
under check.
• Inflation rate may
remain above RBI target till early 2023, including next few months.