Retail inflation swells to 7.44%

Retail inflation, as measured by the Consumer Price Index (CPI) jumped from 4.87% in June to 7.44% in July, powered by higher prices of vegetables, cereals and pulses, with food inflation at its highest level in 39 months

- Roshan Kishore

The numbers released by the National Statistical Office (NSO) on August 14 show that July saw the highest monthly inflation print in 15 months, since April 2022. What makes the latest inflation number especially shocking-a Bloomberg forecast of economists underestimated it by a full percentage point - is that the 2.57 percentage point jump in the headline inflation print between June and July is the highest monthly jump in the current CPI series.

The latest inflation numbers are bad news for both fiscal and monetary arms of policymaking.

The former will be increasingly worried about the squeeze inflation, especially in food prices, is putting on household budgets.

More than half of India's households spend at least half their continued on budget on food. Monetary policy will have to pivot towards a hawkish stance even if it is detrimental to growth. This will be especially bad for households who will have to suffer form a further increase in mortgage payments along with higher prices for groceries. interest rate hikes cannot do much to bring down food prices. With less than a year to go for elections, neither of these are politically very palatable options.