Retail prices in India rose by 4.45% in July, reaching a 19-month high and exceeding the Reserve Bank of India’s target, driven mainly by food, fuel, and transport costs amid divergent growth signals.
India’s July inflation data offered little surprise, but it still mattered. Retail prices rose 4.45% from a year earlier, up from 4.38% in June, according to the figures cited in the lead report. That was the highest reading in 19 months and marked a second straight month above the Reserve Bank of India’s 4% target, even though inflation remained within the bank’s 2% to 6% tolerance band.
The increase was again driven mainly by food, fuel and transport, while core inflation, which strips out volatile items such as precious metals, stayed below 3%. Rural inflation was more pronounced than urban price growth, with food costs rising faster in villages than in cities. Staples including onion, garlic and ginger pushed the food basket higher, even as potato and tomato prices eased.
Transport costs also remained sticky. Inflation in the category quickened again in July, and freight-related services rose further, pointing to continuing pressure on business input costs. The article also noted that restaurants were still dealing with elevated operating expenses despite two reductions in commercial LPG prices, suggesting menu prices may take time to adjust.
Other inflation pressures and growth signals are pulling policy in different directions. Precious metals inflation eased but remained exceptionally high, while the rupee weakened during the CPI reference period, adding to imported price pressure. At the same time, HSBC’s flash composite PMI fell to 54.3 in July from 57.1 in June, the weakest expansion since March 2022, with services slowing sharply even as manufacturing held up better. Reuters has reported that nearly all economists expect the Reserve Bank of India to keep the repo rate unchanged at 5.25% after its August meeting, as policymakers weigh stubborn supply-side inflation against softer momentum in private-sector activity.
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