Rising vegetable prices could push retail inflation to 5.5%..!?
According to the National Horticultural Commission, vegetable prices have risen 34% so far in July after rising 18% in june on a CPI-weighted basis. At least three economists said India's retail inflation could rise to 5.5% in the July-September quarter after higher-than-expected gains in vegetable prices, particularly tomatoes, in recent weeks. rice field. Data expected wednesday showed inflation in the country slowed to between 4% and 5% in april and May, moving closer to the central bank's target of 4% and providing some support in June. expected to remain below 5%.
But gaura Sen Gupta, an economist at IDFC First bank, said July inflation could rise to as high as 6% if vegetable prices continue to rise.
Sen Gupta said vegetable prices had risen 34 percent so far in July after rising 18 percent in june on a consumer price index (CPI) weighted basis, citing data from the National Horticultural Commission. It is worth noting that tomato prices rose 160% month-on-month in the first week of July due to unusual rainfall and crop damage in certain parts of the country, according to data from the IDFC First bank Economic Survey.
Even McDonald's has stopped using tomatoes due to quality and price issues. kaushik Das, chief india economist at Deutsche bank, said in a statement on friday that inflation could reach 5.5% from July to september even if prices start to settle. That's slightly above the Reserve bank of India's 5.2% forecast. "While tomato prices have already risen significantly due to weather disruptions, other commodities have also risen, and the cumulative impact could be felt more in July than in June." wrote Das. Nomura economists expect inflation to average around 5.5% in July and August. While this would not force a rate hike, it would presuppose that monetary policy would remain tight.
“Monetary policy is likely to focus more on underlying inflation than on outliers,” economists Sonal varma and Aurodeep Nandi said in a note last week. “However, higher CPIs driven by vegetable prices may exacerbate policy trade-offs and delay initial cuts.” RBI governor Shaktikanta Das stressed that the suspension of the last two rate hikes should not be seen as a tipping point as the inflation process will be prolonged.
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