New Delhi: The rate of inflation based on retail prices for industrial workers—Consumer Price Index -IW crossed the double-digit mark to touch 11.89% during July, compared with 9.28% during June, because of sharply rising food prices.
This comes even as the inflation rate based on wholesale prices—the Wholesale Price Index—is still in the negative zone, for the 11th week in a row. It was -0.95% for the week ended 15 August.
No respite: With a high likelihood of a drought in more than half of the country, food price are likely to increase. Ramesh Pathania / Mint
With a high likelihood of a drought in more than half of the country due to a poor monsoon, economists say there is no respite in sight on the food price front.
“Inflation has been on the upward trend for quite a few weeks and it will maintain the trend. The impact of lower foodgrains production due to poor monsoon will be more acutely felt during the third and fourth quarter of the financial year,” said Soumendra K. Dash, chief economist at CARE Ratings.
The higher food inflation has also complicated the challenge for the Reserve Bank of India or RBI, which has to maintain a balance between inflation and growth in the economy. RBI deputy governor K.C. Chakrabarty on Monday said that it is faced with the daunting task of keeping inflation under control.
However, economists feel that it would be difficult for the central bank to tighten monetary policy when economic revival is still at a nascent stage.
“There is a good chance that the RBI will desist from tightening its policy stance for the better part of the year, despite signs of food inflation persisting at high levels,” said Axis Bank economists Saugata Bhattacharya and Rituparna Banerjee in an advisory note.