Editor's Pick: Retail inflation surges to 15-month high of 7.44%

Retail inflation resurged in July to hit 7.44% from 4.87% in June, with consumers facing a sharp 11.5% spike in food prices. This is the highest pace of retail inflation since April 2022 and the first time since September 2022 that price rise has been over 7%. Vegetable prices soared 37.3%, mainly due to tomato, while cereals and pulses became over 13% costlier, lifting the food bill by over 12.3% for urban consumers and 11% for rural. Rural residents, however, faced a higher overall inflation rate of 7.63% in July, as per the National Statistical Office. The Consumer Price Index was up 2.9% from June’s levels. Food prices were up 6.7% month-on-month. July’s inflation print, which surpassed most economists’ estimates, breaks a four-month streak below the central bank’s 6% tolerance threshold for consumer price rise and threatens to upend its recent 6.2% average inflation projection for the July to September quarter. A slight let-up in tomato prices this month may help cool the inflation trend a little in August, but elevated pulses, spices (up 21.6%), milk (up 8.34%) and cereal prices remain a concern. “In its latest credit policy, the Reserve Bank of India said it will be ready to act if conditions warrant action. Would 7% inflation for two successive months cause the trigger to be pulled?” said Bank of Baroda chief economist Madan Sabnavis. An interest rate hike cannot be ruled out even though its probability is still low, he noted. However, hopes of interest lower rates may be deferred further, with rating firm ICRA expecting the earliest cut around the second quarter of 2024-25 with “a fairly shallow” rate cut cycle of about 50-75 basis points from the current levels. One basis point equals 0.01 per cent. Wholesale prices remained in deflationary mode for the fourth month in a row in July, but prices of food and primary articles spiked by over 7.5%, narrowing the overall price dip sharply to -1.36% from the 92-month low of -4.1% recorded in June. At the wholesale level, inflation in primary food articles hit 14.3%. Meanwhile, goods exports shrank 15.9% in July to $32.25 billion while imports fell 17% to $52.9 billion, as per Commerce Ministry estimates released on Monday. Slowing demand in major markets such as the U.S. and the EU continued to take a toll on shipments. This is the eighth time in ten months that merchandise exports have dropped. Excluding petroleum and gems and jewellery, however, the dip in the value of exports was just 5.7%. The Hindu’s Editorials Contentious criteria: On PM-USHA and cooperative federalism Short circuit: On India’s tour of the West Indies The Hindu’s Daily News Quiz What is the name of the protection system that will back the new OS that will be installed in the Defence Ministry computers? Maya Chakravyuh Kavach Suraksha To know the answer and to play the full quiz, click here. [logo] Editor's Pick 15 August 2023 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( Retail inflation surges to 15-month high of 7.44% Retail inflation [resurged in July to hit 7.44% from 4.87% in June]( with consumers facing a sharp 11.5% spike in food prices. This is the highest pace of retail inflation since April 2022 and the first time since September 2022 that price rise has been over 7%. Vegetable prices soared 37.3%, mainly due to tomato, while cereals and pulses became over 13% costlier, [lifting the food bill by over 12.3% for urban consumers]( and 11% for rural. Rural residents, however, faced a higher overall inflation rate of 7.63% in July, as per the National Statistical Office. The Consumer Price Index [was up 2.9% from June’s levels](. Food prices were up 6.7% month-on-month. July’s inflation print, [which surpassed most economists’ estimates]( breaks a four-month streak below the central bank’s 6% tolerance threshold for consumer price rise and threatens to upend its recent 6.2% average inflation projection for the July to September quarter. A [slight let-up in tomato prices]( this month may help cool the inflation trend a little in August, but elevated pulses, spices (up 21.6%), milk (up 8.34%) and cereal prices remain a concern. “In its latest credit policy, the [Reserve Bank of India said]( it will be ready to act if conditions warrant action. Would 7% inflation for two successive months cause the trigger to be pulled?” said Bank of Baroda chief economist Madan Sabnavis. An interest rate hike cannot be ruled out even though its probability is still low, he noted. However, hopes of interest lower rates may be deferred further, with rating firm ICRA expecting the earliest cut around the second quarter of 2024-25 with “a fairly shallow” rate cut cycle of about 50-75 basis points from the current levels. One basis point equals 0.01 per cent. Wholesale prices [remained in deflationary mode]( for the fourth month in a row in July, but prices of food and primary articles spiked by over 7.5%, narrowing the overall price dip sharply to -1.36% from the 92-month low of -4.1% recorded in June. At the wholesale level, inflation in primary food articles hit 14.3%. Meanwhile, goods exports [shrank 15.9% in July to $32.25 billion]( while imports fell 17% to $52.9 billion, as per Commerce Ministry estimates released on Monday. Slowing demand in major markets such as the U.S. and the EU continued to take a toll on shipments. This is the eighth time in ten months that merchandise exports have dropped. Excluding petroleum and gems and jewellery, however, the dip in the value of exports was just 5.7%. The Hindu’s Editorials [Arrow][Contentious criteria: On PM-USHA and cooperative federalism]( [Arrow][Short circuit: On India’s tour of the West Indies]( The Hindu’s Daily News Quiz What is the name of the protection system that will back the new OS that will be installed in the Defence Ministry computers? - Maya - Chakravyuh - Kavach - Suraksha To know the answer and to play the full quiz, [click here](. 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