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High inflation will haunt till December, relief expected from January; Interest rates expected to reduced from July 2024

Pankaj Prasad
RBI on Inflation
RBI on Inflation

Rating agency ICRA said on Monday, due to high inflation, now the Reserve Bank of India can go ahead with the plan to cut rates.

The steep rise in the prices of vegetables, especially tomatoes, has once again brought inflation out of control. People will now have to face high inflation till December. It is expected to decrease after January. It has come out of 6% of RBI. Rahul Bajoria, chief economist in India at Barclay's, said, "We expect retail inflation to remain elevated for a few more months." There can be relief in this after the fourth quarter i.e. January. Rating agency ICRA said on Monday, due to high inflation, now the Reserve Bank of India can go ahead with the plan to cut rates. We estimate that now rates can be cut only after July next year. A cut of up to 0.75 percent is expected at that time.

RBI has not changed the rates for the last three times. RBI's inflation target is 4 percent, but 2 percent above or below it is also within its target. ICRA said that if inflation remains above 6% for two quarters, then RBI can also increase the rates. ICRA Chief Economist Aditi Nayar said retail inflation could remain at 6.5% in August. If vegetables are removed from inflation, it can remain at 5.4%.

So inflation reaches 8.5 percent

According to the Bank of Baroda report, if vegetable oils and fats are removed from this inflation, the retail inflation will reach 8.5%. This is because their growth rate is -16.9%. Along with personal care products, household items, education and clothing, shoes and slippers have also contributed to the increase in inflation.

Decreased on annual basis, increased wholesale inflation compared to June

Inflation based on the Wholesale Price Index stood at (-) 1.36% in July amid the rise in prices of food items, especially vegetables. Wholesale inflation has remained below zero for the fourth consecutive month since April. It was 14.07% in July last year. It has increased by 2.76% as compared to (-) 4.12% in June this year.

The decline in inflation in July was mainly due to lower prices of mineral oils, basic metals, chemicals and chemical products, textiles and food articles, the commerce and industry ministry said on Monday. Food inflation stood at 14.25% in July. In June it was 1.32%. However, compared to June, it has increased because, among the food items, the price of vegetables has seen the biggest increase. The wholesale inflation rate of vegetables stood at 62.12 percent in July. In July 2022, this figure stood at 18.46%.

Inflation in fuel and power stood at (-) 12.79 percent in July as against (-) 12.63 percent in June. Inflation in manufactured products stood at (-) 2.51 percent in May. It was (-) 2.71%?in June. The Reserve Bank of India (RBI) kept the repo rate unchanged at 6.5 percent last week for the third time in a row with the aim of keeping rising inflation under control and boosting the economy.

Inflation higher than average in 12 states

Out of 22 states, 12 states have higher inflation than the average. The maximum 9.7 percent has been in Rajasthan.

Their increased prices on a monthly basis

primary goods
increased from -2.87% to 7.57%
manufactured products
increased from -2.71% to -2.51%
food inflation
increased from -1.24% to 7.75%

Wholesale prices of such items increased in one year

Item          August, 2023          August, 2022
Rice             3,662                     3,241
Wheat          2,657                     2,483
Flour            3,097                     2,808
Arhar Dal    12,641                    9,864
Urad Dal     10,380                    9,605
Tomato        9,479                      2,643
(Wholesale price in rupees per quintal) Source: Ministry of Consumer Affairs