August retail inflation at 6.69 per cent

Source: The Economic Times, Sept 15, 2020

New Delhi:India’s retail inflation cooled marginally to 6.69% in August but stayed well above the 6% outer band of the central bank’s inflation target, likely ruling out the possibility of a near-term rate cut.

The rate of inflation – as measured by the Consumer Price Index (CPI) — was 6.73% in July.

It stood at 3.28% in August 2019.

The Reserve Bank of India’s monetary policy committee (MPC) had left the repo rate – the rate at which it lends to banks — unchanged at 4% in its last review meeting in August.

The central bank has a 4% consumer inflation rate target, with a two-percentage point band on either side. CPI inflation has been above the 6% mark since April.

The government revised downward the headline CPI number for July from 6.93% earlier.
Food inflation, led by vegetables, pulses, oils, and meat & fish, was 9.05% last month, lower than 9.27% in July.

Urban inflation at 6.8% was above the national average but also higher than 6.66% registered in rural areas in the past month.

Separately, released data by the commerce and industry ministry showed that India’s wholesale inflation turned positive in August for the first time since March, reflecting a recovery in producers’ pricing power.

Wholesale Price Index (WPI) inflation rose to 0.16% in August from a 0.58% contraction in July, as inflation for manufactured items advanced to 1.27% from 0.51% from the trailing month.

WPI was 1.17% in August 2019.

“It may be seen that as various pandemic-related restrictions were gradually lifted and nonessential activities started resuming operations, availability of price data has also improved,” the National Statistical Office (NSO) said in a statement on Monday.

Retail inflation will come down to below 4% only after Dec: SBI report

Source: Business Standard, Sept 10, 2020

New Delhi: Attributing the recent surge in retail inflation to huge government procurement and supply disruptions on account of the Covid-19 pandemic, an SBI report said that the price rise was likely to come down to below 4 per cent only after December.

The Consumer Price Index (CPI) inflation rate during August, the data for which is yet to be released, was likely to remain at about 7 per cent, said SBI Ecowrap. The data is scheduled to be released on Monday.

According to government data, the retail inflation rose to 6.93 per cent in July, mainly driven by rising prices of food items like vegetables, pulses, meat and fish. It was 3.15 per cent in the corresponding month last year.

“We expect August inflation numbers to be elevated at around 7 per cent or even higher and if the base effect is the primary reason, inflation could only come down to below 4 per cent possibly beyond December,” the SBI report said.

However, the report further said that it looks difficult to believe that supply disruptions would normalise against the huge upsurge in pandemic in rural areas and this now poses an upside risk to inflation numbers.

“We are thus less hopeful of any rate cut in current fiscal/at best 25 bps as February MPC meeting would consider December inflation only,” it said.

The Reserve Bank of India, which mainly factors in retail inflation while arriving at its monetary policy, had kept the short-term lending rate unchanged to help tame inflation last month.

The report postulate that the jump in food prices is largely because of huge procurement by government and supply disruption that pushed up prices of cereal, potato, tomato and protein items.

It further said as inflation targeting comes up for review in 2021, “we believe, one way to make inflation targeting successful in the Indian context as time goes by is to reach the 4 per cent target over a particular business cycle rather than for a particular date…” This would encourage predictable inflation targeting in the face of persistent negative shocks, and recently the US Federal Reserve also espoused such a conviction, it said. The RBI has been tasked by the government to keep inflation at 4 per cent (+,- 2 per cent).

RBI expects inflation to firm up further in coming months

Source: The Economic Times, Aug 25, 2020

Mumbai: Country’s headline inflation is expected to firm up further in the coming months largely due to disruptions in food and manufactured items’ supply chains, the Reserve Bank of India said in its annual report for 2019-20 released on Tuesday.

The Reserve Bank of India (RBI) said headline inflation picked up strongly during the closing months of 2019-20 and the short-term outlook for food inflation has turned uncertain.

“Disruptions in food and manufactured items’ supply chains could amplify sectoral price pressures, thus posing an upside risk to headline inflation. Heightened volatility in financial markets could also have a bearing on inflation,” said the RBI Annual Report 2019-2020.

All of these may influence inflation expectations of households, which are adaptive in nature, and show significant sensitivity to shocks to food and fuel prices, the report said.

Monetary policy, therefore, has to keep a constant vigil on price movements, especially as they can translate into generalised inflation.

According to government data, retail inflation rose to 6.93 per cent in July, mainly driven by rising prices of food items like vegetables, pulses, meat and fish.
In its monetary policy review earlier this month, RBI had said that the retail inflation is expected to be at elevated levels during the second quarter, but may ease in the second half of the current fiscal year.

Supply chain disruptions persist, resulting in inflation pressures across segments, RBI Governor Shaktikanta Das said while announcing the decisions taken by the central bank’s Monetary Policy Committee (MPC) on August 6.

Going by the trend of global commodity price developments and weak demand conditions, consumer price inflation remained benign during 2019 and early 2020 in a number of economies the overall headline inflation was subjected to higher volatility in 2019-20 relative to the previous four years, underpinned by high flux in food prices, RBI said.

Within the food group, price spikes for different items occurred at different time points. The seasonal behaviour has changed in the case of prices of many food items such as, onion, ginger, brinjal, cauliflower, okra and green peas.

Interestingly, despite being the most volatile item, seasonality in onion prices has declined significantly over the years, partly reflecting improvement in cold storage facilities, RBI said.

“As the COVID-19 pandemic spread across the globe, all commodity prices dipped. The shutdown of industries in China in February 2020 and later in Europe and the US led to a fall in demand for metals, easing their prices.

“Prices of food items like palm oil, soy oil, sugar and corn also declined with retrenchment in demand for ethanol and bio-diesel as crude oil prices declined,” the report said.

Retail inflation for farm, rural workers drops in July

Source: The Economic Times, Aug 20, 2020

Retail inflation for farm and rural workers eased to 6.58 per cent and 6.53 per cent, respectively in July this year on account of lower prices of certain food items, the labour ministry said on Thursday.

Inflation based on CPI-AL (Consumer Price Index-Agricultural Labourers) and CPI-RL (Consumer Price Index-Rural Labourers) stood at 7.16 per cent and 7 per cent, respectively in June.

Inflation based on food index of CPI-AL and CPI-RL recorded at 7.83 per cent and 7.89 per cent, respectively in July 2020, according to a labour ministry statement.

Amongst states, the maximum increase in the consumer price index numbers for agricultural labourers was experienced by Meghalaya (15 points) and for rural labourers, it was experienced by Jammu & Kashmir and Meghalaya (14 points) mainly due to rise in the prices of milk, meat goat, fish dry, bidi, vegetables and fruits and bus fare etc, the statement said.

On the contrary, the maximum decrease in the CPI numbers for agricultural labourers and rural labourers was experienced by Tripura (-8 points) and (-5 points), respectively mainly due to fall in the prices of rice, meat goat, fish fresh/dry etc.

The all-India consumer price index numbers for agricultural labourers and rural labourers (base:1986-87=100) for the month of July 2020 increased by 3 and 4 points to stand at 1,021 and 1,028Â points, respectively, the statement said.
The major contribution towards the rise in general index of agricultural labourers and rural labourers came from food, with 2.49 points and 2.64 points, respectively mainly due to rise in prices of arhar dal, masur dal, ground nut oil, meat goat, poultry, vegetables and fruits etc.

The rise/fall in index varied from state to state.

In case of agricultural labourers, it recorded an increase of 1 to 15 points in 17 states and a decrease of 3 to 8 points in 3 states.

Tamil Nadu with 1,216 points topped the index table whereas Himachal Pradesh with 786 points stood at the bottom.

In case of rural labourers, it recorded an increase of 1 to 14 points in 15 states and a decrease of 1 to 5 points in 4 states while it remained stationary in Rajasthan. Tamil Nadu with 1,202 points topped the index table whereas Himachal Pradesh with 838 points stood at the bottom.

Commenting on this, Labour Minister Santosh Gangwar said, “Despite the unfavorable situation in the country owing to the COVID-19 pandemic, the measures taken by the government have been able to control the inflation during this period.”

Labour Bureau Director General D S Negi said, “The increase in the index will have a positive impact on the wages of millions of workers working in the unorganised sector in rural areas.

“Labour Bureau has been able to bring out the monthly indices as per the pre-defined schedule consistently even during the tough time of COVID-19,” Negi added.

Retail inflation inches up to 6.93% in July on the back of higher food prices

Source: The Economic Times, Aug 14, 2020

New Delhi: Retail inflation accelerated for the fourth successive month to 6.93% in July, on the back of a further rise for food prices. The reading is well above the 6% outer band of the central bank’s inflation target.

The Reserve Bank of India’s monetary policy committee (MPC) had last week decided to hold key rates, stating that upside risks to food prices remained. The central bank has a 4% consumer inflation rate target with a two-percentage point band on either side.

Retail inflation, as measured by the consumer price index (CPI), has been above the 6% mark since April. It was 3.15% in July 2019. The government also revised upward the CPI data for June from 6.09% to 6.23%.

The likelihood that the MPC would persist with a rate pause in its October meeting has climbed sharply and a final rate cut is likely to be deferred to the December or February 2021 meeting, said Aditi Nayar, the principal economist at ratings firm ICRA.

Led by vegetables, pulses, spices, and meat & fish, food inflation neared the double-digit mark at 9.62% last month. The National Statistical Office also revised the June food inflation figure to 8.72% from 7.87% earlier. Inflation for pulses and products, meat and fish, and vegetables was 15.92%, 18.81% and 11.29%, respectively in July. Rural (7.04%) inflation was higher than urban (6.84%) in the past month.
Supply disrupted Higher inflation during the ongoing pandemic is due to supply-side disruptions and not demand-led, economists said.

“Inflation increase of some of these commodities at a time of depressed demand is perplexing, which suggests the inflation increase is mainly due to supply disruption, not due to demand pressure,” India Ratings chief e`conomist Devendra Kumar Pant said.

India inflation likely edged up in July on higher food prices: Poll

Source: Business Standard, Aug 11, 2020

India’s retail inflation edged up slightly in July due to higher food prices, remaining firmly above the RBI’s medium-term target of 4 per cent for a 10th straight month, a Reuters poll showed.

Food prices, which account for nearly half the inflation basket, have soared since April due to supply-side disruptions caused by a nationwide lockdown imposed to contain the spread of the coronavirus which has infected more than 2 million people and killed over 44,000 in the world’s second-most populous country.

While the central government gradually eased restrictions in June, regional lockdowns in some major agricultural producing states continued to disrupt supplies of essential perishables like fruits and vegetables.

The August 6-10 Reuters poll of over 45 economists showed Indian retail inflation rose to 6.15 per cent last month from 6.09 per cent in June.

Forecasts for the data, scheduled to be released on Aug 12 at 1200 GMT, ranged from 5.00 per cent to 6.55 per cent.

“We see July CPI inflation to be steady above the Reserve Bank of India’s 6 per cent policy limit. Food remained a dominant inflation driver but high utility and transport costs also contributed,” said Prakash Sakpal, Asia economist at ING.

The government suspended the release of CPI inflation headline numbers for April and May due to insufficient data during the lockdown.

The RBI kept interest rates on hold last week after reducing the repo rate by a total of 115 basis points since February – despite a recent rise in retail consumer prices – but said it would ensure inflation remains within target.

According to the RBI’s latest survey, household inflation expectations for the three-month and one-year horizons rose to over 10 per cent in July, suggesting Asia’s third-largest economy could enter a period of stagflation – a phase with lofty inflation, high unemployment and stagnant demand.

“With inflation expected to remain elevated on supply side disruptions, we think a rate cut is more probable in December,” said Rini Sen, India economist at ANZ.

“We expect food prices to abate likely from September onwards, once the rabi crop (summer harvest) enters the market.” Monsoon rains, which are critical for farm output and economic growth, are expected to be 104 per cent of a long-term average in August and September, indicating bumper harvests and helping to alleviate the economic damage caused by the coronavirus pandemic.

Inflation for Agricultural and Rural labourers remains high

Source: The Hindu Business Line, Jul 20, 2020

New Delhi: Inflation for rural and agricultural labourers remained noticeably high in June 2020 compared to June 2019 price levels.

In June 2020 it stood at 7.16 per cent for agricultural labourers and 7 per cent for rural labourers.

This means that rural and agricultural labourers had to shell out significantly more money for essentials compared to the same period a year ago.

According to official data, Consumer Price Index for Agricultural Labourers (CPI-AL) was at 1,018 points (950) and Consumer Price Index for Rural Labourers stood (CPI-RL) stood at 1,024 points (957) for June 2020.

Inflation for agricultural and rural labourers had peaked in January this year with CPI-AL linked inflation at 11.04 per cent and CPI-RL linked inflation at 10.62 per cent this year. This delta had been declining since then but prices have remained higher in 2020 compared to 2019.

“Point to point rate of inflation based on the CPI-AL and CPI-RL decreased in June 2020 from 8.40 per cent and 8.12 per cent respectively in May 2020. Inflation based on food index of CPI-AL and CPI-RL is at 8.57 per cent and 8.41 per cent respectively in June 2020,” an official statement said.

Covid impact The sequential lowering of inflation in June 2020 is being attributed to the distribution of free foodgrains and other government efforts to mitigate the impact of Covid-19 crisis.

Retail Inflation above 6% in June, economists expect further rate cuts

Source: The Economic Times, Jul 13, 2020

New Delhi: Retail inflation in India firmed up in June, breaching the tolerance band of 4% with a margin of 2% set by the Monetary Policy Committee.

Miscellaneous items, clothing and footwear, and pan, tobacco and intoxicants pushed inflation up, prompting independent economists to forecast another round of monetary easing by the Reserve Bank.

Inflation, as measured by the consumer price index (CPI), was 6.09% in June, up from 5.84% in March, the last official headline inflation number released by the government, even as food inflation cooled to a nine-month low of 7.87% in June from 9.2% in May. As per experts, a decline in demand has not had any impact on prices and inflation has hardened on supply side disruptions.

Retail inflation in June 2019 was 3.18%.

“The headline CPI inflation for June 2020 has exceeded the upper end of the MPC’s target range, posing a dilemma in terms of the appropriate policy response as the economy gradually extricates itself from the supply and demand shock created by the pandemic,” said Aditi Nayar, principal economist at ICRA.

Though the pandemic-related restrictions were gradually lifted and non-essential activities started resuming operations, the government said: “The data collected, however, did not meet the adequacy criteria for generating robust estimates of CPIs at the state-level”.
The National Statistical Office also released a technical note detailing the imputed index data for April and May using the methodology recommended in ‘Business Continuity Guidelines’, brought out by Inter-Secretariat Working Group on Price Statistics — a combined forum of ILO, EuroStat, OECD, UNECE, World Bank and IMF — in May.

“This is for the first time that the data flow was disrupted not at the local level but at the national level for several commodities,” NSO said in the note explaining the methodology proposed to be followed for filling gaps in CPI series for non-availability of price data in April-May.

As per calculations from the imputed index, retail inflation rose to 7.22% in April but eased to 6.27% in May.

Monetary easing likely
While inflation in urban areas was 5.9% in June, it was 6.2% in rural areas.

Clothing and footwear inflation was at 3.53% in June and that in pan, tobacco and intoxicants was 9.7%. Fuel and light inflation was at 2.69%.

“Given that the MPC has already front loaded most of its scope of rate cuts in anticipation of moderating inflation trajectory, we see room for another 25 bps of rate cut followed by a probable pause,” Bhardwah said.

Nayar expects “an asymmetric cut of 25 bps in the repo rate and 35 bps in the reverse repo rate in the next policy meeting”.

“In our view, the MPC will choose to frontload its assessment of the space for further rate cuts, in a bid to support sentiment and hasten transmission amid the substantial surplus in systemic liquidity, although the decision is unlikely to be unanimous,” Nayar said.

India inflation likely slowed in June as output returns

Source: The Economic Times, Jul 09, 2020

inflation likely eased in June from March, a Reuters poll predicted, as loosened coronavirus-led restrictions in most of the country drove a slight recovery in economic activity and helped reduce a supply crunch.

The July 3-8 poll median of over 35 economists showed India’s retail inflation in June moderated to 5.30% from March’s revised 5.84%, still breaching the Reserve Bank of India’s medium-term target of 4.00%.

Headline inflation numbers were not released in April and May due to inadequate data collection owing to lockdown restrictions.

If the consensus is realised it would be the lowest inflation rate since November last year but would still exceed the central bank’s mandate for a ninth consecutive month.

“The drop in inflation is caused by a marked increase in economic activity which ground to a halt during the lockdown phase and has only been recovering slowly as restrictions have been eased,” said Hugo Erken, head of international economics at Rabobank.

A decline in price pressure might help the RBI, which has already cut its repo rate by a cumulative 115 basis points since the lockdown started on March 25, to stay on its accommodative path and ease policy further.

“The central bank’s cautious assessment of growth prospects, normal monsoon and easing food pressures provide sufficient indication that inflation is likely to decelerate over the next few months,” said Radhika Rao, economist at DBS Bank.

“The dovish policy bent is likely to dominate the panel’s policy guidance, keeping the door open for further rate cuts.”

India’s industrial output contracted 37.8% in May from a year earlier, the sharpest fall since current calculations began, mainly hit by falling infrastructure output which accounts for nearly 40% of industrial production.

Infrastructure output contracted an annual 23.4% in May, according to government data.

Retail inflation for farm, rural workers eases marginally in May

Source: The Economic Times, Jun 19, 2020

Retail inflation for farm and rural workers in May fell slightly to 8.4 per cent and 8.12 per cent, respectively in May as compared with April this year, a labour ministry statement said on Friday.

“Point to point rate of inflation based on the CPI-AL (agriculture labourers) and CPI-RL (rural labourers) decreased to 8.40 per cent and 8.12 per cent in May 2020 from 8.80 per cent and 8.52 per cent, respectively in April 2020,” the statement said.

Inflation based on food index of CPI-AL and CPI-RL is at 10.40 per cent and 10.21 per cent, respectively in May 2020.

The All-India Consumer Price Index Numbers for Agricultural Labourers and Rural Labourers (Base: 1986-87=100) for the month of May 2020 increased by 5 points and 6 points to stand at 1019 and 1025 points, respectively.

The major contribution towards the rise in general index of agricultural labourers and rural labourers came from food, with (+) 4.44 points and (+) 4.70 points, respectively, mainly due to rise in prices of rice, arhar, masur, ground nut oil, meat goat, poultry, vegetables and fruits etc.

The rise/fall in index varied from state to state.

In case of agricultural labourers, it recorded an increase of 2 to 19 points in 14 states and a decrease of 1 to 7 points in 5 states while it remained stationary for Rajasthan. Tamil Nadu with 1,208 points topped the index table whereas Himachal Pradesh with 788 points stood at the bottom.

In case of rural labourers, it recorded an increase of 1 to 18 points in 15 states and a decrease of 1 to 7 points in 5 states. Tamil Nadu with 1,194 points topped the index table whereas Himachal Pradesh with 838 points stood at the bottom.

Amongst states, the maximum increase in the consumer price index numbers for agricultural labourers and rural labourers was experienced by Karnataka (19 points and 18 points, respectively) mainly due to rise in the prices of rice, jowar, ragi, meat goat, poultry, vegetables and fruits, bidi, and barber charges etc.

On the contrary, the maximum decrease in the consumer price index numbers for agricultural labourers and rural labourers was experienced by Bihar state (- 7 points each ) mainly due to fall in the prices of maize, onion, fruits & vegetables etc.

Labour Minister Santosh Gangwar has said that it is commendable that Labour Bureau is bringing out retail inflation and other sets of data during these challenging times.

He said the inflation numbers are expected to improve with more economic activities in coming days.

Labour Bureau, a wing of the Ministry of Labour and Employment, has been compiling consumer price index (CPI) numbers for agricultural labourers and rural labourers every month on the basis of the price data collected from 600 sample villages spread over 20 states by visiting personally to the designated outlets.

In view of the containment measures taken to limit the spread of COVID-19, the personal visit of the field staff was suspended from March 19, 2020 and prices were collected through electronic means of communication.

In the month of May 2020, the price data was received from 433 villages which were collected, to the extent possible, through personal visits and telephone calls.