Retail inflation likely eased in July due to a fall in food and fuel prices but was above the upper limit of the Reserve Bank of India’s target for the seventh straight month.
Consumer price-based inflation likely eased to an annual 6.78 per cent in July, a five-month low, from 7.01 per cent in June, according to a Reuters survey of economists.
Forecasts in that Reuters survey ranged between 6.40 per cent and 7.10 per cent for the CPI data, which is due at 5.30 pm on Friday.
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Food prices, which account for nearly half of the consumer price index basket, likely softened last month. The lagged effect from a fuel tax cut likely restrained price pressures somewhat.
The bulk of the slowdown comes from recession fears, which have lowered global commodity prices, with the international oil benchmark, Brent crude, is down about 9 per cent for the month, hitting pre-Ukraine crisis lows, and below $100 a barrel.
Government interventions to reduce import duties and restrictions on wheat exports likely helped too.
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Still, consumer price rises are expected to persist at a strong pace in the months ahead, with the RBI’s projections pointing to inflation remaining above its upper end of the 2-6 per cent target range.
The near-term inflation outlook remains highly uncertain as the uneven nature of this year’s monsoon and a weak rupee currency may dull the effectiveness of those government efforts to tame consumer price rises.
In June, inflation held above 7 per cent for the third month in a row, and price pressures have held above the upper-end, 6 per cent, of the central bank’s medium-term target.
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Rising inflation rates notwithstanding, India will be the fastest growing economy in the world this year, a top government source said on Thursday.
While inflation continues to be above the comfort zone, the economy has continued on its recovery path, supported by pent-up demand for services and higher industrial output.
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The government, the source said, is taking continuous steps and engaging with the RBI to bring down inflation.
