Retail inflation at 23-month high

Retail inflation in July crossed the 6% mark on the back of spiralling food prices and remained above the Reserve Bank of India's (RBI) inflation target for the fourth consecutive month, posing a challenge for the new governor who is expected to assume office in September.
Inlation as measured by the consumer price index rose an annual 6.1% in July -a 23-month high -compared to previous month's 5.8%. Rural India recorded a higher retail inflation at 6.7% as against 5.4% in urban areas.
Industrial output growth rose an annual 2.1% in June, up from 1.1% in the previous month and 4.2% in June last year. During April-June, industrial output growth rose 0.6% compared to a rise of 3.3% in the same period last year. Retail food prices soared 8.4% in July compared with the previous month's 7.8% rise. Prices of pulses remained stubborn, rising 27.5%, while eggs prices grew 9.3% year-on-year. Vegetable prices rose 14%, while sugar and confectionary rose 21.9%.
The government has retained the inflation target of 4% (plus minus 2%) for the next five years as it set the process to nominate government members on the proposed monetary policy committee (MPC), which will decide on interest rates in the months ahead. Rajan left interest rates unchanged in his latest monetary policy earlier this month but flagged the risks of inflation.Economists expect food prices to moderate as supplies improve but hopes of a cut in interest rates have receded for now . Above average monsoon rains are expected to trigger robust harvest and help moderate food prices.

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