Retail inflation slows to 9-month low at 4.17%

‘Moderate food inflation to continue till MSP impact hits’
Retail inflation eased to a nine-month low of 4.17% in July as food inflation cooled to its lowest level since July 2017, according to official data released on Monday. Inflation based on the Consumer Price Index (CPI) slowed from the 4.92% pace set in June. Within the index, food category inflation was 1.73% in July, easing from 3.11% in June. The other significant slowdown in prices was in the pan and tobacco category, which saw growth of 6.34%, down from 8.05% in June.
“Decline in retail inflation in July 2018 was on expected lines,” Devendra Pant, chief economist and senior director (Public Finance), India Ratings and Research, wrote in a note. “Unfavourable base effect of June 2017 turned favourable in July. Inflation numbers from July 2017 till June 2018 had adverse base effect due to GST… which had led to inflation increasing at a faster pace. Internally, food inflation moderated and is expected to behave at this pace for the next two months before the impact of the revision of kharif MSP starts impacting inflation.”
The rise in global fuel prices has led to a continuous increase in inflation in the fuel and light segment, Mr. Pant added. He said that this category, coupled with the transport and communication group, is expected to exert pressure on retail inflation. Growth in the fuel and light category accelerated to 7.96% in July, from 7.22% in June.
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