Retail inflation resurges to 7% as food prices mount

Retail inflation resurges to 7% as food prices mount

For Mains

The Current Inflation Rate:

  • India’s retail inflation increased to 7% in August from 6.71% in July.
  • Rural inflation was at 6.8% in July, rose to 7.15% in August.
  • Urban inflation rate moved up from 6.49% in July to 6.72% in August.
  • Inflation in cereals rose from 6.9% in July to 9.6% in August.
  • Inflation in vegetable prices, which was 10.9% in July, rose to a high level of 13.23% in August.

The major cause of inflation:

  • The major driver behind this increase in inflation is the 7.62% increase in food prices.
  • Since kharif crop sowing is increasingly unlikely to reach last year’s levels, food inflation could remain high even with healthy reservoir levels give good omens for a timely rabi sowing.
  • A rebound in demand for services also increased miscellaneous and housing inflation, and is likely to remain in effect.

Why this is concerning:

  • This is the eighth consecutive month that retail inflation has stayed RBI’s prescribed higher threshold of 6% inflation for the economy, and results in a reduction of spending power among the poorer households.
  • Since industrial output growth in July dropped to the lowest level since April to just 2.4%, and output levels dropping 2.75% month on month would make the RBI’s ability to control inflation using monetary policy a bit more complicated.

Source : THE HINDU