Inflation eases in July; RBI’s tightening offset by food price jump

Our Bureau New Delhi | Updated on August 18, 2011 Published on August 16, 2011


Pranab bets on good monsoon to tame inflation

Headline inflation (rate) eased marginally in July, with the policy tightening by the RBI partly offset by surging food prices, especially vegetables.

Despite the moderating trend in headline inflation, the continuing price pressures in manufactured goods raises the odds that the central bank will continue its monetary tightening to curb prices further.

The annual Wholesale Price Index-based inflation for July rose 9.22 per cent in July, slightly slower than June's 9.44 per cent year-on-year growth.

FM confident

According to data released by the Government on Thursday, the final inflation estimates for May were revised upwards to 9.56 per cent from the provisional estimate of 9.06 per cent. In April too, the final estimate was sharply revised upwards to 9.74 per cent from 8.66 per cent.

On the latest data, the Finance Minister, Mr Pranab Mukherjee, said inflation pressure should ease further on the back of a good monsoon.

“I am quite confident that the good monsoon will ensure moderation of inflationary pressure… Inflationary pressure is in the system and we shall have to make efforts to have the inflationary pressure at an acceptable moderate level for which we are working in tandem with the Reserve Bank,” he told reporters here.

According to the latest data, on an annual basis, food inflation rose by 8.19 per cent in July, lower than the 8.38 per cent recorded in June. This was despite a sharp surge in prices of vegetables such as onions.

Inflation in the manufactured products group rose by 7.49 per cent in July, up from the 7.43 per cent in June.

There was a surge in the index level of 10 of the 12 sub-groups of manufactured products during July as compared to the previous reported month.

The base effect ensured that fuel inflation moderated to 12.04 per cent from 12.67 per cent in June, despite a fuel price hike.

Analysts' expectation

Analysts expect that the increase in the manufactured product inflation in July raises the possibility that the central bank will be forced to hike rates again at its next review.

The RBI has continuously hiked increased rates since March last year.

The central bank, which is scheduled to meet on September 16 for its next policy review, had raised rates by a steeper-than-expected 50 basis points in July.

Published on August 16, 2011
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