(LiveMint)
India’s retail inflation decelerated to 4.17% in July from 4.92% a month ago on the back of softening food prices, data released on Monday by the Central Statistics Office showed. The Reserve Bank of India (RBI) in its monetary policy review on 1 August increased its policy rate by 25 basis points for the second time in two months, blaming rising inflation risks. The RBI also raised its inflation outlook to 4.8% in the second half (October-March) of 2018-19 from its earlier projection of 4.7%. The June round of the RBI’s survey of households reported a further uptick of 20 basis points in inflation expectations for both three-month and one-year ahead horizons compared with the last round.
The Asian Development Bank (ADB) last month raised its average inflation projection for India to 5% from 4.6% for this fiscal, blaming higher crude oil prices, a depreciating rupee and increase in minimum support prices. The International Monetary Fund last month lowered its growth projection for India by 10 basis points to 7.3%, citing higher oil prices and speedier interest rate increases by the Reserve Bank of India (RBI) due to higher than expected inflation.
The Economic Survey 2017-18 presented on 29 January had estimated that every $10 per barrel increase in the price of oil reduces economic growth by 0.2-0.3 percentage points, increases wholesale inflation by about 1.7 percentage points and widens the current account deficit by about $9-10 billion.
