According to the Finance Ministry, core inflation is below 6% for the fourth month in a row.
New Delhi: Late Monday, the Finance Ministry described the increase in retail inflation from 6.71% in July to 7% in August as “modest,” attributing it to an adverse base effect and an increase in food and fuel prices, which it referred to as “the transitory components” of Consumer Price inflation.
The Ministry emphasized that core inflation, which excludes these ‘transient components of food and beverages as well as fuel and light inflation, was 5.9% in August, remaining below the tolerance limit of 6% for the fourth consecutive month.
“Despite irregular monsoons and negative seasonality in vegetable prices, food inflation in July remained lower than the current year’s April peak.” Tariffs on imported commodities have been routinely rationalized to soften the prices of edible oils and pulses, and stock limitations on edible oils have been maintained to minimize hoarding,” the Ministry added.
The Ministry of Commerce stressed that inflation in “oils and fats” and “pulses and products” has moderated to 5.62% and 2.52%, respectively, and that the government “has prohibited exports of food products like wheat flour/atta, rice, maida, etc. to keep domestic supplies steady and curb price rises.”
“The impact of these actions is expected to be seen more strongly in the following weeks and months,” the report stated.
“With global inflationary pressures, inflationary expectations remain anchored in India with stable core inflation,” the Ministry said, citing a July survey by IIM-Ahmedabad, which found that the “one-year ahead Business Inflation Expectations Survey has declined by 34 basis points to 4.83% from 5.17% in June.” A basis point is equivalent to 0.01 percentage point.
“After 17 months, inflation predictions have decreased below 5%,” the Ministry said. “Prices of important inputs such as iron ore and steel have stabilized in global markets.” The government’s efforts to rationalize tariff structures of inputs to boost local supply has helped to keep cost-push inflation in consumer items under check,” the report said.