Limiting central bank’s scope for easing policy rates, provisional annual inflation rate based on all India general Consumer Price Index (CPI) (Combined) rose more than expected at 7.96% in July as compared to 29 months low of 7.31% in June and 9.64% in the July, 2013. Street was widely expecting July CPI to come at 7.40%. In a nasty surprise, inflation in June was revised up to 7.46% from the earlier estimate of 7.31%.
CPI numbers of the month of July 2014 for Rural, Urban and Combined stood at 145.1, 141.9 and 143.7 respectively. The corresponding provisional inflation rates for rural and urban areas for the month under review stood at 8.45% and 7.42% as compared to 9.14% and 10.18% respectively in the previous month.
Meanwhile, newly introduced Consumer Food Price Indices (CFPI) for rural, urban and combined stood at 149.4, 150.1 and 149.6 respectively for July 2014. Further, the provisional annual inflation rate based on all India CFPI (combined) for rural and urban for the month under review on point to point basis (July 2014 over July 2013) rose at 9.85% as compared to 8.45%. While, the corresponding provisional inflation rates for rural and urban areas for July 2013 stood at 10.66% and 12.52% respectively.
The inflation in July rose mainly due to the rate of price rise in food items, which have 45% weight in the CPI. Food inflation in July this year rose to 9.36% as against 8.05% in June and 11.22% in July, 2013. Besides, Fuel and light prices rose 4.47% in July on a yearly basis, against 4.58% in June, while inflation in clothing, bedding and footwear declined to 7.31% in July against 8.65% in June.
The official data, issued on Tuesday, clearly justifies the Reserve Bank of India’s stance of not cutting the policy rate at its review earlier this month. However, inflation in July still remains to be the third lowest in the series. Except for June 2014, it was only in January 2012 that inflation was lower than the level witnessed for the month under review. In January 2012, it was 7.55 per cent.
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