Retail inflation eases a tad to 9.86%, July figures fail to enthuse experts

NEW DELHI: Retail inflation declined marginally in July in line with the drop in wholesale inflation, but most experts dismissed it as a one-off event, cautioning that the rate of price rise could accelerate in the coming months.

The new All India Consumer Price Index rose 9.86% in July from a year ago, marginally below the downward revised 9.93% for June, data released onTuesday by the ministry of statistics showed.

Headline inflation for July, as measured by the wholesale price index, had dropped to a three-year low of 6.87%. “Downtrend continues, but details not encouraging,” Citi economist Rohini Malkani wrote in a note to clients.

Rural and urban consumer inflation was 9.76% and 10.1%, respectively in July as compared to 9.65% and 10.44% in June.

The moderation in the retail inflation was mainly due to lower fuel inflation, which moderated to 7.4% in July down from 10.3% in June largely because of the high base of last year.

Administered fuel prices had been revised in June-end last year. With international crude prices inching up and food articles becoming expensive, economists expect a quick reversal.

“As the base effects wash out and global oil prices in July and early August have once again picked up, the disinflationary windfall from lower energy price inflation is likely over,” BNP Paribas economist Mole Hau wrote in a note.




Food inflation moved higher to 11.5% in July from 10.8% in June due to rising prices of cereals and pulses. Core CPI inflation — inflation excluding food and fuel — moderated to 8.9% in July from 9.2% in the previous month.

With one more price reading to come before the RBI reviews its monetary policy on September 17, the latest data is unlikely to have any material impact.

“Today's slight moderation is positive, but CPI inflation is still close to double digits. We expect all policy rates to remain unchanged for the remainder of 2012 and 50 bps of rate cuts in H1 of 2013,” said Nomura economists Sonal Varma and Aman Mohunta in a note.

Vegetables prices were the key contributor to the high food inflation. Year-on-year, vegetable prices were up 27.3% in July.