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Inflation: Tomato-onion increase the difficulty, economists claim - inflation may come out of RBI's purview again

Pankaj Prasad
Tomato onion price increase
Tomato onion price increase

Retail inflation is likely to reach 6.7 percent in July 2023 with a monthly increase of 1.90 percent, led by higher prices of food articles, led by tomato and onion.

Retail inflation is likely to reach 6.7 percent in July 2023 with a monthly increase of 1.90 percent, led by higher prices of food articles, led by tomato and onion. SBI has expressed this estimate in the Ecorap report. The retail inflation rate in June was 4.8 percent. The government is likely to release the Consumer Price Index (CPI) based inflation data for July on August 14, 2023.

Ahead of the decision of the RBI's Monetary Policy Committee, a survey of economists has claimed that retail inflation in July may once again come out of the RBI's comfortable range of 6 percent due to a wild rise in the prices of food items.

Barclay's economist Rahul Bajoria said, vegetable prices were marginally higher in June than in May. But, a sharp increase in prices was recorded in July. Due to this, retail inflation can increase to 6.3 percent in July. VK Vijay Kumar, chief investment strategist, Geojit Financial Services, said retail inflation in vegetables, milk, cereals and pulses could rise to 5.5 percent in July on higher ground.

236 percent increase?in tomato price

The report of Deutsche Bank India states that the main reason for the increase in inflation is the rise in the prices of tomatoes and onions. The prices of rice have also increased. The daily prices of 22 essential food items increased by 12.3 percent. In June, it had seen an average increase of 2.4 percent. Tomato prices increased by 236.1 percent in July. It had increased by 38 percent in June. Onion prices have increased by 15.8 percent as against 4.2 percent. Whereas, the price of potatoes increased by 9.3 percent.

Repo rate may remain unchanged for the third time

RBI can keep the repo rate unchanged for the third time in a row. Earlier in June and April, 2023, the central bank had kept the policy rate unchanged. SBI said, inflation is largely seasonal, which may come down further. Hence, RBI will keep the repo rate unchanged this time also. The current repo rate of 6.50% will remain in place for a longer period. According to SBI, inflation is a matter of concern for many countries with developed economies. But, India has managed better to bring it down.

The results of the RBI's Monetary Policy Committee meeting will come on Thursday. The central bank may increase the cash reserve ratio from 4.5 per cent. This would mean that banks may have to keep more money with the RBI.