data released by national statistics office ,NSO) on Friday showed retail inflation, as measured by the Consumer Price Index (CPI), rose 6.7% yearly in July, down from 7% in June. The food price index declined to 6.6% in June from 7.6% in June on improved supplies and measures taken through the system by the Center and RBI.
Rural inflation was higher at 6.8%, while urban was 6.5%. Of the 23 states and union territories, 15 had inflation rates above 6%, while eight recorded inflation below 6%. Rising inflationary pressures prompted the RBI to raise interest rates and in its recent review it hiked interest rates by 50 basis points.
Retail inflation data showed vegetable prices rose 10.9 per cent year-on-year during the month due to rise in crude oil prices, while fuel and light prices rose 11.8%. The slowdown in global commodity prices due to fears of a slowdown in developed countries could have an impact on domestic prices as well.
“Although the July print is above the RBI target for the seventh month in a row, we strongly believe that inflation in India (and possibly the US as well) has begun to decline. Core CPI (minus food and fuel) also slipped to a 10-month low of 5.79% in July. Soumya Kanti GhoshGroup Chief Economic Advisor at SBI.
Economists say they still expect the central bank to hike interest rates in the coming months to bring inflation closer to the target.
“Seeing it MPCWith the focus on inflation expectations and the Governor’s statement on inflation moving closer to the medium term target of 4%, we expect another rate hike of ~10-35 bps in the September 2022 policy meeting. Aditi NayariChief Economist at rating agency ICRA.
Separate data shows factory growth in June stood at 12.3%, down from 19.6% in May. The manufacturing sector grew by 12.5% during the month, compared to a growth of 13.2% in June 2021.
“Manufacturing output showed healthy growth in June and supported the overall IIP (Index of Industrial Production) activity. Rating agency chief economist DK Joshi said, this reflects an improvement in demand conditions and easing of supply-side challenges. CRISIL,