Responding to the trend reversal witnessed in retail inflation, which increased to 7% in August compared with 6.71% in July, the finance ministry said the hike is attributable to an adverse base effect and an increase in transient components of the consumer price index (CPI) based inflation like food and fuel prices.
The finance ministry also said the impact of export curbs on food products will be felt “more significantly” in the coming weeks and months.
“Government has prohibited exports of food products like wheat flour/atta, rice, maida, etc to keep domestic supplies steady and curb rise in prices. The impact of these measures is expected to be felt more significantly in the coming weeks and months,” the finance ministry said in a series of tweets after the release of CPI data.
“The headline inflation based on retail CPI recorded a moderate increase from 6.71% in July 22 to 7.0 % in August 22. This increase is attributable both to an adverse base effect and an increase in food & fuel prices - the transient components of CPI inflation. Core inflation calculated by excluding the transient component of CPI viz. “food and beverages” and “fuel and light” was recorded at 5.9% in August 2022, remaining below the tolerance limit of 6% for the fourth consecutive month,” said the ministry in one of the tweets.
“Prices of major inputs like iron ore & steel have sobered in the global markets. This coupled with the measures taken by the govt to rationalise tariff structures of inputs to augment domestic supply has helped to keep cost-push inflation in consumer items under control,” the ministry added.
The ministry also pointed out that despite erratic monsoons and negative seasonality in vegetable prices, food inflation in July was still lower than the April peak of the current year. “With global inflation pressures, inflationary expectations remain anchored in India with stable core inflation,” it added.
“To soften the prices of edible oils & pulses, tariffs on imported items have been rationalised periodically & stock limits on edible oils have been kept, to avoid hoarding. Inflation in “oils and fats” &“pulses and products” have moderated to 5.62 % & 2.52 % respectively,” it added.
It may be noted that IIM-Ahmedabad's one-year ahead business inflation expectations survey in July 2022 has declined by 34 bps to 4.83% from 5.17% in June. Inflation expectations have fallen below 5% after 17 months.
