The Wholesale Price Index-based inflation was 12.41 percent in August and 11.80 percent in September last year. This year, the Wholesale Price Index (WPI) touched a record high of 15.88 percent in May.
September is the 18th consecutive month of double-digit WPI inflation.
"Inflation in September 2022 is primarily contributed by rising in prices of mineral oils, food articles, crude petroleum & natural gas, chemicals & chemical products, basic metals, electricity, textiles etc. as compared to the corresponding month of the previous year," an official statement said.
Inflation in food articles in September eased to 11.03 percent, against 12.37 percent in August.
However, inflation in vegetables rose to 39.66 percent during the month, as against 22.29 percent in August.
In the fuel and power basket, inflation came in lower at 32.61 percent in September, against 33.67 per cent in August.
In manufactured products and oil seeds it was 6.34 percent and (-) 16.55 percent, respectively.
The RBI mainly looks at retail inflation to frame monetary policy.
Retail inflation remained above the Reserve Bank's upper tolerance threshold of 6 percent for the ninth month in a row and was at a 5-month high of 7.41 percent in September, as per data released earlier this week.
To tame stubbornly high inflation, the RBI has hiked the key interest rate four times this year to 5.90 percent -- the highest since April 2019.
The US Labour Department said on Thursday that core inflation, excluding food and energy prices, rose 6.6 per cent in September from the corresponding period of last year.
It was also up from 6.3 per cent in August, making it the highest increase since 1982.
On a monthly basis, the core retail inflation rose 0.6 per cent in September, according to official data.
US stock futures fell and Treasury yields soared higher after the inflation data topped came out. The dollar also rallied.
September's retail inflation of 7.41 per cent was much higher than last September's level of 4.35 per cent.
This is the ninth straight month when retail inflation has remained above the the RBI's tolerance limit of 2 to 6 per cent.
High prices of cereals, meat, fish and eggs along with those of fruits and vegetables led to the spike in retail inflation.
Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research said: "While the market was expectin g the headline CPI inflation print to remain over 7.0 per cent in Sep-22, the actual figure has come higher at 7.4 per cent vs 7.0 per cent in Aug-22. As expected, the key factor has been food inflation which has increased sequentially by 0.9 per cent, leading to the overall inflation to go up by 0.6 per cent over the index in the previous month."
According to him, irregular rainfall in September' 22 has been the primary reason behind higher inflation in vegetables and fruits, which is temporary in nature.
While the inflation in cereals has also inched up, the steps being taken by the government and a reasonably healthy kharif output are expected to address the concerns behind the further hike in cereal prices, Chowdhury added.
"What, however, will remain a worry is the rise in core inflation to 6.3 per cent from 6.1 per cent in Aug-22, highlighting that the price pressures have started to get embedded.
"Going forward, we expect the average inflation in H2FY23 to moderate, given the moderation in commodity prices and the slowdown in global economic activity although such moderation will be gradual.
"The risks of imported inflation, however, exist due to the continuing depreciation of the rupee. In our opinion, the likelihood of a moderate hike of 35-40 bps in the repo rate in Dec-22 is high given not only the inflation print but also the pressure on the currency. The systemic liquidity will also get tighter and will start getting reflected through a rise in bank deposit rates to the extent of 100-150 bps over the next few months," Chowdhury added.
According to Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services, the food inflation surged to 22-month high of 8.6 per cent YoY in Sep'22, while core inflation rose to 4-month high of 6.3 per cent.
On the other hand, the Index of Industrial Production (IIP) declined 0.8 per cent YoY in Aug'22 as against the market consensus/expectation of 1.7 per cent. This was the first contraction in 18 months, Gupta said.
"Overall, the combination of slightly higher inflation and fall in IIP raises concerns. However, next month data and US Fed's policy will decide whether we see 35 or 50bp hike by the RBI in Dec'22. In any case, we continue to expect that the terminal rate will be 6.5 per cent and there will be pause in global monetary policy in CY23," Gupta said.
Vivek Rathi, Director-Research, Knight Frank India said the future trajectory of inflation is on the upside, pressurised by import inflation arising from sharp rupee depreciation.
Price pressure on import of crude oil shall have a cascading impact on other items of the basket too.
Additionally, factors such as transmission of input costs and pick-up in consumer demand supported by service sector recovery would further add to inflationary risk in the coming months, Rathi added.
With the inflation level consistently remaining ahead of the four per cent CPI target level of the RBI, an out of turn monetary policy rate action remains a possibility, Rathi said.
Daniel Leigh, the IMF's head of the World Economic Studies Division, said at a news conference on Tuesday, "We do expect that inflation will come back into the inflation tolerance band 4 per cent in the fiscal year 2023-2024, and additional monetary tightening is going to ensure that that happens."
IMF's chief economist Pierre-Olivier Gourinchas said, "Inflation is still above the central bank target in India at 6.9 per cent (that) were projected for this year and coming down to 5.1 per cent".
"So, the overall stance of policy within that fiscal and monetary policy should probably be on a tightening side," he added at the release of the IMF's World Economic Outlook (WEO) report.
According to the IMF, the global inflation rate is projected to be 8.8 per cent this year and come down to 6.5 per cent next year.
Overall, Gourinchas said, "India has been doing fairly well in 2022 and is expected to continue growing fairly robustly in 2023".
"We have a growth rate at 6.8 per cent for this year and the projection is at 6.1 per cent for next year," he said.
Explaining the downward revision of India's growth rate for the current fiscal year by 0.6 per cent from the 7.4 per cent projection made in July, he said, "It's mostly due to the external outlook as well as tighter financial conditions, and the growth revision for the first quarter of the fiscal year that came in weaker than previously expected."
Despite the downgrade, India is still the world's fastest-growing major economy.
The IMF projected the global growth rate is projected this year to be only 3.2 per cent and 2.7 per cent next year.
"The worst is yet to come," Gourinchas said, warning of a looming recession.
He said, "We are expecting about a third of the global economy to be in a technical recession."
He attributed it to the three largest economies, the US, China and the Euro Area continuing to "stall".
The WEO projected the US economy to grow by only 1.6 per cent in 2022, China by 3.2 per cent, and the Euro Zone by 3.1 per cent.
According to the IMF, the high-interest rate was contributing to slower growth in the US, the rising energy prices in Europe and the Zero Covid policy in China where lockdowns are still being imposed in some regions and the crisis in the property sector.
"Compared to developed countries, inflation is quite low, for example the British are witnessing the worst inflation in the last 50 years, Americans are facing highest inflation of the last 45 years, interest rates are very high... compared to those countries, the nation's inflation is low because buoyant economy, our country's economy is very vibrant," he said at a event in Jamnagar, where he laid the foundation stone and dedicated projects worth Rs 1,448 crore in the district.
He appreciated the demolition work carried out along the coast by the Gujarat government.
The Prime Minister also dedicated the Saurashtra Narmada Avtaran irrigation link 7, which carries Narmada water for drinking.
He recalled the services of the erstwhile Jadeja dynasty to society and the country, noting how then ruler Digvijaysinh Jadeja gave shelter to Polish children during World War 2, because of which India-Poland relations are strengthened.
About the oil refinery and oil economy of Jamnagar, he remarked that every citizen would be proud of the fact that crude oil is refined on this very land. Modi also said that the double-engine government of Centre and the state has continuously worked for the industrial and infrastructural development of the state.
The youngest on the list is Kaivalya Vohra aged 19, who founded Zepto which shows the impact of the startup revolution.
The latest rich list includes several promoters of startups, including those floated by women.
"Cumulative wealth has increased by 9.4 per cent, while average wealth has decreased by 1 per cent. 602 individuals saw their wealth increase or stay the same, of which 149 are new faces, whilst 415 saw their wealth drop and there were 50 dropouts," as per a statement issued by IIFL Wealth and Hurun India.
According to the report, India has 221 billionaires, down 16 compared to last year.
While Chemicals and Financial Services added the greatest number of new entrants to the list, Pharma is still at number one and has contributed 126 entrants to the list.
"Despite the slump in economy owing to geo-political challenges, volatility in global financial markets, and sharp spike in oil prices, India has successfully made an impression on the world's economy/wealth map," said Yatin Shah, Co-Founder & Joint CEO, IIFL Wealth.
He said pharmaceuticals, chemical & petrochemicals, IT, and financial services amongst others are some of the key sectors substantially contributing to wealth creation.
"There are 65 founders of 37 unicorns along with 14 professional managers who have emerged as the cornerstone of wealth creation this time in the list," Shah said.
"Gurugram debuted in the top 10 cities producing most number of entrants and we have a record addition of 149 new faces to the list from 32 industries and 36 cities," said Anirudha Taparia, Joint CEO, IIFL Wealth.
"The trends in IIFL Wealth Hurun India Rich List 2022 prove that India has taken booster shots against the global crisis. Be it Ukraine War or inflationary pressures, the Indian growth story continues against all odds as 149 individuals entered the IIFL Wealth Hurun India Rich list of 1,103 who cumulatively have a wealth of INR 100 lakh crore. India also gave a new number two, Gautam Adani, to the Hurun Global Rich List," commented Anas Rahman Junaid, MD and Chief Researcher, Hurun India.
As per the list, Adani group promoter Gautam Adani has surged ahead to the top spot beating Mukesh Ambani of Reliance Industries with wealth more than doubling (116 per cent) in the last year.
Adani is ahead of the second-ranking Ambani by more than Rs 3,00,000 crore. Vaccine maker Cyrus S. Poonawalla and family also moved up three ranks after their wealth increased by 25 per cent year-on-year.
Three families, Shiv Nadar and family, S.P. Hinduja and family and L.N. Mittal and family, have reported a decline in wealth, but still find a place in the top ten.
Four individuals still make the India Top 10 after ten years, led by Mukesh Ambani and followed by L,N, Mittal, Dilip Shanghvi and Shiv Nadar.
Other highlights:
* For the first time, 100 startup founders, with a cumulative wealth of Rs 506,000 crore and average age of 40, feature in the latest rich list;
* 12 individuals worth Rs 1 lakh crore or more, down from 13 in last year's rich list;
* 221 dollar billionaires, down 16 as compared to last year and four times since Hurun India started 10 years ago;
* A record 735 entrepreneurs are self made in the list, up from 659 last year;
* The two promoters of New Delhi Television Ltd (NDTV) Prannoy Roy and wife Radhika Roy entered the list with a combined wealth of Rs 2,000 crore after Adani group acquired stake and announced an open offer for the channel company;
* Alakh Pandey, popularly known as 'Physics Wallah' and his Co-Founder Prateek Boob debuted the list with a wealth of Rs 4,000 crore on the back of their startup Physics Wallah turning Unicorn;
* Neha Narkhede, 37, Co-Founder of Confluent, a streaming data technology company, is the youngest self-made woman entrepreneur in the 2022 list;
* The listing of beauty and wellness E-Commerce platform Nykaa, 59-year-old Falguni Nayar overtook Biotech Queen Kiran Mazumdar Shaw as the richest self-made Indian woman in the IIFL Wealth Hurun India Rich List.
It added through a series of tweets that core inflation calculated by excluding the transient components of CPI like "food and beverages" and "fuel and light" was recorded at 5.9 per cent in August, and thus remained below the tolerance limit of 6 per cent set by RBI for the fourth consecutive month.
"Prices of major inputs like iron ore and steel have sobered in the global markets. This coupled with the measures taken by the government to rationalise tariff structures of inputs to augment domestic supply has helped to keep cost push inflation in consumer items under control," the ministry said.
Despite erratic monsoon and negative seasonality in vegetable prices, food inflation in August was still lower than the April peak of the current year.
With global inflation pressures, inflationary expectations remain anchored in India with stable core inflation, the ministry said on an optimistic note.
"IIM-Ahmedabad's One-year Ahead Business Inflation Expectations Survey in July has declined by 34 bps to 4.83 per cent from 5.17 per cent in June. Inflation expectations have fallen below 5 per cent after 17 months," it said in another tweet.
"To soften the prices of edible oils and pulses, tariffs on imported items have been rationalised periodically and stock limits on edible oils have been kept, to avoid hoarding," the ministry said while listing the measures taken to curb prices of essential commodities.
Inflation in "oils and fats" and"pulses and products" have moderated to 5.62 per cent and 2.52 per cent, respectively, the Finance Ministry pointed out.
"The government has prohibited exports of food products like wheat flour/atta, rice, maida etc. to keep domestic supplies steady and curb rise in prices. The impact of these measures is expected to be felt more significantly in the coming weeks and months," it said.
Job creation and equitable distribution of wealth remain the other focus areas, she said at India Ideas Summit here.
"Some of course are red-lettered (priorities), some may not be. Red-lettered ones would of course be jobs, equitable wealth distribution and making sure India is moving on the path of growth.
"In that sense inflation is not red-lettered. I hope it doesn't surprise many of you. We have shown that in the past couple of months that we were able to bring it to a manageable level," she said at the event.
According to official data, retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank's comfort level of 6 per cent for the seventh consecutive month.
The Consumer Price Index (CPI) based retail inflation was at 7.01 per cent in June and 5.59 per cent in July 2021. It was above 7 per cent from April to June this fiscal.
She exuded confidence that the Reserve Bank would manage the volatility emerging from aggressive rate hike stance by the US Fed and the European Central Bank.
Talking about fiscal management during the COVID-19 period, she said, India with a targeted fiscal policy managed through a challenging time without printing money.
Referring to the global energy crisis triggered by the ongoing Russia-Ukraine war, she said, uncertainty over availability of crude, natural gas continues.
She also urged for deepening of ties between India and the US in all respects including on payment technology.
Saving money, protecting it from wasteful spending can make you financially independent. Here are a few tips to achieve financial Independence at the right age.
1. Keep a track on your spending
It might be hard to keep your daily purchases in your head or on a piece of paper. But, it is extremely important to keep a track on the daily spending. Nowadays, there are a lot of apps available that can help you keep a track on your expenses.
2. Come up with a realistic budget
Make a realistic budget that fits your lifestyle. Doing so is not about cutting back on spending: if you are accustomed to having coffee every morning, cutting it out from the budget won't work. Instead, try to plan ahead what you are going to spend your money on.
3. Create an emergency fund
Creating an emergency fund will help you deal with unforeseen circumstances without borrowing money with interest or selling your things to get out of the situation urgently. Putting aside 1 USD a day will give 30 USD more to your account at the end of the month.
4. Pay your bills on time
Tracking your monthly bills is actually a part of your budgeting plan. Paying your bills on time is an easy way to manage your spending and avoid fees.
5. Get rid of unnecessary recurring charges
If you have ever signed up for a free trial to a streaming service, you might have recurring charges you have forgotten about. Check your credit card statements and ensure you don't pay for something you can live without. Unsubscribe and put that money aside for your emergency fund!
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Loans help you with major life purchases like a house or a car. For other big purchases, say a 65" TV, cash is often the best way to go as it saves you the monthly interest payment you would otherwise have to pay.
7. Use credit cards wisely
Most credit cards nowadays come with a free annual fee, and promotional offers could sometimes be beneficial. However, be sure your repayments are on time, keep your credit card limit for tight situations, and repay purchases within a month to avoid additional fees.
8. Start saving for retirement
Regardless of your age, start saving for old age-the younger you are, the more you will get. Set up a separate fund or term deposit to ensure you don't access the funds for purposes other than savings.
(With input from IANS)
The Wholesale Price Index-based inflation was 15.18 per cent last month and at a record high of 15.88 per cent in May.
It was 11.57 per cent in July last year.
The WPI inflation continued its declining trend for the second month in July but remained in double-digits for the 16th consecutive month beginning April last year.
Inflation in food articles in July eased to 10.77 per cent from 14.39 per cent in June.
The rate of price rise in vegetables declined substantially to 18.25 per cent in July against 56.75 per cent in the previous month.
In the fuel and power basket, inflation was 43.75 per cent in July compared to 40.38 per cent in the last month.
Inflation in manufactured products and oil seeds was 8.16 per cent and (-)4.06 per cent, respectively.
The Reserve Bank of India mainly looks at retail inflation to frame monetary policy.
Retail inflation remained above the Reserve Bank's comfort level for the seventh month in a row and was at 6.71 per cent in July.
To tame stubbornly high inflation, the RBI has hiked the key interest rate three times this year to 5.40 per cent.
The central bank had projected retail inflation to average 6.7 per cent in 2022-23.
Attending Azadi Ki Amrit Mahotsav programme in Bhubaneswar, Patra said, “India will become the second largest economy in the world not by 2048 as predicted earlier, but by 2031.
Even if it does not sustain this pace and slows to 4-5 per cent in 2040-50, it will become the largest economy of the world by 2060. India will surpass China by 2060.”
He further quoted the Organisation for Economic Co-operation and Development, 2021 calculations saying that the Indian economy will overtake the US by 2048.
This would make India the largest economy in the world after China. "In order to achieve it, we should clear obstacles pertaining to economy," said the Odisha-born top RBI official.
According to traders in Delhi, the heat wave led to lower production of wheat this year, impacting the domestic supplies of the agricultural produce.
Jai Prakash Jindal of Delhi Lawrence Road Mandi said that the prices have been going up daily since the last few days.
"Even today the rate went up by Rs 30 and now the price here is Rs 2,550 per quintal. In Haryana, it is Rs 2,400 per quintal, while in Rajasthan the price is Rs 2,370 per quintal," he said.
The mandi prices were hovering around Rs 2,150 to Rs 2,175 per quintal since the ban on wheat export was imposed on May 14, 2022.
Jindal said that production has been on the lower side this year and the government did not stop export at the right time.
"A lot of wheat was already exported by the time the government put a ban on wheat export. It should have been done earlier," he said, adding that import of wheat will be needed to fulfil the festive demands in the upcoming months of October and November.
Government data revealed that wheat export has increased in the last few years. Wheat valued at $2,121.5 million was exported in 2021-22. In the first four months of 2022-23 (April-July), wheat worth over $1,190 million was exported.
The reasons for the increase included various factors like international demand-supply situation, rise in global commodity prices and conflict between major wheat exporting nations like Ukraine and Russia, etc.
Meanwhile, government sources said that the Centre may take a few initiatives to meet the demand and to curb the rising prices of wheat.
It may scrap the 40 per cent import duty on wheat. Besides, it can also impose stock holding limits on wheat and voluntary disclosure of wheat stocks held by stockists and traders.
Officials said that the procurement of wheat has fallen due to higher purchase of wheat by traders as market price of the produce has shot up due to prevailing international geopolitical situations.
As per the government data, the average inflation was 6.65 per cent in 2014, came down to 4.91 in 2015 and further slipped to 3.33 in 2017. Even in 2019, it was 3.72 per cent but jumped to 6.62 in 2020. Average inflation rate in 2021 was 5.14 per cent.
The National Statistical Office (NSO) releases the inflation rate on the 12th of every month (next working day if 12th is a holiday), based on the Consumer Price Index (CPI).
As per the Ministry of Statistics, overall increase in CPI based inflation is broad based and major contributions is due to increase in food and fuel related index. Food inflation is led by cereals, milk, fruits, vegetables, spices and prepared meals. Fuel inflation was driven up by a rise in LPG and kerosene prices.
"CPI excluding food and fuel hardened across almost all components, mainly by the transport and communication sub-group due to increase in the prices of petrol and diesel. A large part of the increase in inflation in the recent months can be primarily attributed to supply shocks linked to the war in Europe," said the ministry.
The price situation of major essential commodities is monitored by the government on a regular basis and corrective action is taken from time to time, it said, adding that several supply side measures have been taken by the government to address inflation. These include reduction in import duties and cess on pulses, rationalisation of tariffs and imposition of stock limits on edible oils and oil seeds, maintenance of buffer stock for onion and pulses etc, said the ministry.
Further, buffer stock of pulses and onion has been maintained for price stabilisation by the government. Calibrated release of pulses and onions from the buffer has been initiated to moderate the prices in the market.
The Monetary Policy Committee (MPC) of RBI increased the policy repo rate by 90 basis points in the financial year so far (by 40 bps in the off cycle meeting on May 4 and by 50 basis points on June 8) taking the policy repo rate to 4.90 per cent. Further, with the institution of the Standing Deposit Facility (SDF) at 40 basis points above the fixed rate reverse repo, the effective policy rate has been raised by 130 basis points by the RBI since April.
The committee led by MLA Amar Prasad Satpathy comprises of legislators of all the parties including Congress and BJP. The committee will review the demands of the legislators and submit a report to the Speaker.
Meanwhile, Speaker has asked the government to consider the issue.
Notably, the members of the Odisha Legislative Assembly on Saturday urged the government to raise their salary in view of rising inflation. MLAs cutting across party lines raised the demand during the Zero Hour citing the inflationary condition.
“The salary of MLAs was revised for the last time in 2017. Also, our travel allowances were raised that year. Keeping the inflationary condition in mind, the State government should raise our salary,” demanded Opposition chief whip and BJP MLA Mohan Majhi.
At present, Odisha legislators draw Rs 1 lakh salary per month while MLAs in other states get more salary. They avail basic salary of Rs 35,000 while another Rs 65,000 is provided as allowance. This excludes daily allowances of Rs 1500 per day that they get when the assembly is in session and Rs 2000 per day when they visit outside the state.
The salary of Odisha MLAs is far less compared to many other states. Odisha MLAs’ monthly remuneration is 19th among Indian states.
According to official data, Telangana lawmakers are the highest paid in the country. They get around Rs 2.75 lakh per month followed by Maharashtra with Rs 2.30 lakh, Rs 2.05 in Karnataka and Rs 2.05 in Jharkhand.
Ruling BJD MLA Amar Prasad Satpathy said the demand is justified since salaries are periodically revised for all sections.
“The MLAs need to spend a lot on the constituents,” Satpathy said.
Similarly, Opposition chief whip and BJP MLA Mohan Majhi said the cost of commodities has increased. But, there has been no rise in their salary since 2017.
“The salary of Odisha MLAs is far less compared to many other states,” Majhi said.
Supporting him, Congress MLA Tara Prasad Bahinipati also demanded more salary for legislators.
Initiating a discussion on prise rise under Rule 193 in the Lok Sabha, he alleged that one per cent of the people are controlling 77 per cent of the nation wealth.
GST has been increased on daily items like rice, curd, paneer and unfortunately, even the children have not been spared as stationary prices have also gone up. He spoke in Hindi and concluded the debate with a Punjabi couplet saying that since the demonetisation, the country's economy is on a downward trajectory.
Defending the government, BJP MP Nishikant Dubey said in the neighbouring countries like Sri Lanka, Bangladesh and Bhutan, the inflation is rising and so is unemployment.
"Despite such a bad situation in India, the poor are still getting two-time meal for free.. should not the Prime Minister be thanked for it as the World Bank has given funds to various countries like Egypt."
He also attacked the Trinamool Congress over the cash recovered from former state minister Partha Chatterji's aide and Jharkhand Congress MLAs who were arrested in Bengal.
The central bank has already announced to gradually withdraw its accommodative monetary policy stance.
The Reserve Bank of India's rate-setting panel -- the Monetary Policy Committee -- will meet for three days from August 3 to deliberate on the prevailing economic situation and announce its bi-monthly review on Friday.
With retail inflation ruling above 6 per cent for six months continuously, the RBI had raised the short-term borrowing rate (repo) twice so far this fiscal -- by 40 basis points in May and 50 basis points in June.
The existing repo rate of 4.9 per cent is still below the pre-Covid level of 5.15 per cent. The central bank sharply reduced the benchmark rate in 2020 to tide over the crisis created by the pandemic.
Experts are of the view that the RBI would raise the benchmark rate to at least the pre-pandemic level this week and even further in later months.
"We now expect the RBI MPC to raise the policy repo rate by 35 bps on August 5 and change the stance to calibrated tightening," BofA Global Research report said.
The possibility of an aggressive 50 bps and a measured 25 bps hike cannot be ruled out either, it added.
A research report by Bank of Baroda said that while the US Federal Reserve raised the rate by 225 bps in CY22, the RBI has hiked the repo rate by 90 bps. An aggressive rate hike by the Fed is feeding expectations that the RBI may also front load its rate hikes.
However, conditions in India do not warrant an aggressive stance by the RBI, it added.
"... in the absence of any fresh shocks, India's inflation trajectory is likely to evolve in line with the RBI's projections. Hence, we expect that the RBI may hike rates by only 25 bps in Aug'22, followed by another 25 bps rate hikes in the next two meetings," it said.
The government has tasked the RBI to ensure consumer price index-based inflation remains at 4 per cent with a margin of two per cent on either side.
Dhruv Agarwala, Group CEO of Housing.com, said while other banking regulators across the world, including the Fed, are raising rates aggressively, the situation in India does not warrant that kind of approach yet.
"In our estimate, it is expected to be in the range of 20-25 basis points," he said.
In a report, Radhika Rao, Executive Director and Senior Economist at DBS Group Research, said the RBI monetary policy committee is expected to stay focused on price stability over the next two quarters.
Factoring in peak inflation in the July-September quarter, "we now expect a 35 bps hike in August, followed by three 25 bps for the terminal rate to level off at 6 per cent by end-FY23", she opined.
The retail inflation based on Consumer Price Index (CPI), which RBI factors in while arriving at its monetary policy, is above 6 per cent since January 2022. It was 7.01 per cent in June.
The spike in inflation, highest since the 1980s, with "ongoing increases" in borrowing costs against a backdrop ahead of a decelerating economy.
The Federal Reserve raised rates by 75 percentage point, same as that in June.
"The labor market is extremely tight, and inflation is too high," Fed Chair Jerome Powell said at a news conference, explaining the unusually large hike.
Recent indicators of spending and production have softened," the Fed said in a statement.
"Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low."
High interest rates are intended to cut spending "specially on mortgages and autos" and cool demand in the economy and therefore prices.
At the same time, the US Federal Reserve has to walk a thin line here because too many and too steep a rate hike could trigger recession and that's a looming fear.
Asked about the possibility of recession, Powell said at the news conference, "I do not think the US is currently in a recession and the reason is there are too many areas of the economy that are performing too well."
He added: "This is a very strong labor market ... it doesn't make sense that the economy would be in a recession with this kind of thing happening."
"Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Federal Open Market Committee said on Wednesday as it lifted the policy rate to a range between 2.25 and 2.50 per cent in a unanimous vote.
Even as employment gains have remained "robust," the Fed noted in the new policy statement that "recent indicators of spending and production have softened," an affirmation to the fact that the aggressive rate hikes they have put in place since March are beginning to bite.
The latest hike comes on the back of a 75-basis-point rate hike in June and smaller bites in May and March, the Fed has now raised its policy rate by a total of 225 basis points in 2022 as it battles a 1980s-level breakout of inflation with 1980s-style monetary policy.
Speaking at the Kautilya Economic Conclave, organised by Institute of Economic Growth, New Delhi, Das said, with the supply outlook appearing favourable and several high frequency indicators pointing to resilience of the recovery in the first quarter (April-June) of 2022-23, the inflation may ease gradually in the second half of 2022-23, precluding the chances of a hard landing in India.
Tracing the history of inflation in India, Das said in early 2022 inflation was expected to moderate significantly to the target rate of four per cent by third quarter of FY23, with a projected average inflation rate of 4.5 per cent for 2022-23.
"This assessment was based on an anticipated normalisation of supply chains, the gradual ebbing of Covid-19 infections and a normal monsoon. The median inflation projection from the Survey of Professional Forecasters at five per cent for 2022-23 was also quite benign," he said.
However, this was overtaken by the Russia-Ukraine war since February 2022, leading to a sharp spike in global crude oil and other commodity prices.
"Global food prices reached a historical high in March and their effects were felt in edible oil, feed cost and domestic wheat prices. The loss of Rabi wheat production due to an unprecedented heat wave put further pressures on wheat prices. Cost-push pressures were also aggravated by supply chain and logistics bottlenecks due to the war and sanctions," Das said.
According to him, RBI's objective was to safeguard the economy and preserve financial stability.
"Our endeavour has been to ensure a soft landing. These objectives continue to guide our actions even today and it will continue to be so in future," he added.
Das said the benefits of globalisation come with certain risks and challenges. Shocks to prices of food, energy, commodities and critical inputs are transmitted across the world through complex supply chains.
"In fact, recent developments call for greater recognition of global factors in domestic inflation dynamics and macroeconomic developments which underscore the need for enhanced policy coordination and dialogue among countries to achieve better outcomes," he said.
According to him, the insurance against such inevitable global shocks ultimately is built on sound economic fundamentals, strong institutions and smart policies. Price stability is key to maintaining macroeconomic and financial stability.
"We will continue to calibrate our policies with the overarching goal of preserving and fostering macroeconomic stability. In this endeavour, we will remain flexible in our approach while being cogent and transparent in our communication," Das said.
In comments that came two days after former Chief Economic Advisor Arvind Subramanian co-authored an article blaming the RBI for acting late on inflation and being behind the curve, Das said the central bank acted as per the evolving economic developments and also gave out a timeline of its actions to explain the shift.
" tolerance of a higher inflation during the pandemic was a necessity, and we still stand by our decision," Das said speaking at an event organised by Financial Express here.
He said the RBI switched into ultra-accommodation as soon as the country went into the lockdown and shifted focus to inflation two years later in April 2022, when it saw that the GDP had gone beyond the pre-pandemic level.
Despite its accommodative policies, the economy contracted by 6.6 per cent in FY21 and recovered to barely above the pre-pandemic levels in FY22, he said, stressing that a shift in policy management to focus on inflation even 3-4 months before April 2022 was not apt.
"I feel that we are very much in line with the requirements of our time, the RBI has acted proactively and I would not agree with any perception or any sort of description that the RBI has fallen behind the curve," Das said.
Subramanian's article blamed the RBI for being behind the curve, pointing out that the 4 per cent inflation target has not been met since October 2019 and in 18 of the 32 months since then, the headline consumer price inflation has breached even the RBI's ceiling of 6 per cent. It also raised question marks over inflation forecasting.
Disclosing that he has not read the article and making it clear that he does not want to join any debate, Das said the RBI's mandate is that of flexible inflation targeting where it is required to take care of both price rise and growth, especially so in extraordinary situations like a pandemic.
"If we had been very firm in maintaining 4 per cent (inflation) and kept the rates unduly high, I'm sorry, the consequences of that approach would have been disastrous for the economy.
"If we had attempted to keep monetary policy tighter at that time, the economic damage that you would have caused to our economy and to our financial markets would have been enormous and it would have taken years for India to come back," he noted.
According to the governor, the RBI was not optimistic with its FY23 inflation estimate of 4.5 per cent made public ahead of the Russian invasion of Ukraine, which sent the oil prices rocketing.
Das said in the estimate, the RBI had baked-in oil prices to be at USD 80 per barrel, and had decided to wait till the end of the fiscal to see the developments and take actions accordingly.
In March, the RBI saw that the economic activity has surpassed the pre-pandemic levels of FY20 and also felt a clear pressure on price rise, which resulted in a shift in policy to help contain the persistent inflation, Das said, pointing out that measures initiated in the April review like the introduction of the standing deposit facility at a rate higher than the reverse repo were akin to a rate hike.
It could not be very strong in its rate hikes and hence, waited till May to increase the repo by 0.40 per cent in the off-cycle meet and then the 0.50 per cent increase delivered last week, he noted.
Seeking to stress that the RBI was watchful of the inflation situation, the governor said the central bank, which had initially decided to look through the higher CPI prints in the pandemic, dropped the word "transitory" from its commentary in August 2021 when it saw the inflation is persistent.
The RBI also focused on liquidity withdrawal after that, Das said, admitting that events like the repeated waves of COVID infections and also the war beyond its control have led to the exit from easy money policies getting longer than expected.
He, however, assured of a smooth exit from the 'chakravyuh' (labyrinth) of easy liquidity and added that it will be a "soft landing".
The governor also said that the RBI has been able to pull out excess liquidity of over Rs 6 lakh crore from a slew of measures that it has carried out.
Asked about what is the neutral rate as per his understanding at present, Das said it is very difficult for him to pinpoint a number, but added that the negative interest rate situation in India is much better than the same in advanced economies.
Das said heading into the pandemic and lockdowns, the RBI's focus was to support growth and ensure that the financial markets are functional and claimed success in both.
"Our focus was to ensure that the economy reaches a stage where we can pull out the support in terms of liquidity and the support in terms of lower interest rates we wanted growth to reach a particular level where we were comfortable that it was stable," he said.
Swain said the economic condition outside the country has been affecting the financial condition inside the county. “Due to the Russia and Ukraine war, the supply chain has largely been affected across the world. The supply chain of goods from China has also snapped,” said Swain.
In order to get out of the present situation, Swain suggested that the centre should hold discussions with all the states with respect to reducing tax and cess.
Regarding the soaring prices of vegetables, Swain said, “We usually depend on other states for various vegetables. In those places, the production has been affected due to adverse weather conditions. We are feeling the pinch due to these reasons.”
Presently, consumers in the State are struggling with the rising prices of broiler chicken and tomato. With the chicken selling at Rs 280/300 a kilogram, for non-veg lovers, relishing non-veg items has become a costly affair. Similarly, housewives have started skimping on use of tomato to adjust their budget.
As per the government data released on Monday, WPI inflation has remained in double digits for the 12th consecutive month beginning April 2021.
The last time such a level of WPI was recorded was in November 2021, when inflation was 14.87 per cent.
WPI Inflation in February was at 13.11 per cent, while in March last year, it was 7.89 per cent.
During the month, inflation in food articles eased to 8.06 per cent, from 8.19 per cent in February. Vegetable inflation was 19.88 per cent, against 26.93 per cent in February.
"The high rate of inflation in March, 2022 is primarily due to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, etc owing to disruption in the global supply chain caused by the Russia-Ukraine conflict." the Commerce and Industry Ministry said in a statement.
Inflation in manufactured items was 10.71 per cent in March, against 9.84 per cent in February.
In the fuel and power basket, the rate of price rise was 34.52 per cent during the month.
Inflation in crude petroleum spiked to 83.56 per cent in March, from 55.17 per cent during February.
Retail inflation spiked to 6.95 per cent in March -- the third consecutive month that the consumer price index has breached the RBI's tolerance limit of 6 per cent, data released last week showed.
The Reserve Bank earlier this month kept its key repo rate -- at which it lends short-term money to banks -- unchanged for the 11th time in a row at 4 per cent, to support growth.
"Global food prices along with metal prices have hardened significantly. Economy is grappling with a sharp rise in inflation... Inflation is now projected at 5.7 per cent in 2022-23 with Q1 at 6.3 per cent; Q2 at 5 per cent; Q3 at 5.4 per cent and Q4 at 5.1 per cent," RBI Governor Shaktikanta Das said while unveiling the first monetary policy review for the current fiscal year.
In its earlier policy review in February, the RBI had projected retail inflation to be at 4.5 per cent in 2022-23.
The apex bank kept the benchmark interest rate -- repo, at which it lends short-term money to banks -- unchanged at 4 per cent.
The Monetary Policy Committee (MPC) also decided unanimously to remain accommodative, while focussing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
This is the 11th time in a row that the Monetary Policy Committee (MPC) headed by Das has maintained the status quo.
"It may, however, be noted that given the economic volatility on global crude oil prices... the evolving geopolitical tensions, any projection of growth and inflation is fraught with risk," Das said.
RBI, however, hoped that the likely good harvest from the rabi (winter) crop will keep prices of cereals and pulses under check.
The Reserve Bank has been mandated to keep retail inflation at 4 per cent with a bias of 2 per cent on either side.
As per a Ministry of Finance notification, these agri commodities include wheat, paddy (non-basmati) chana, mustard seeds and its derivatives, soya bean and its derivatives, crude palm oil and moong.
"Futures trading is to be suspended with immediate effect for one year in respect of the following commodities paddy (non-basmati), wheat, chana, mustard seeds and its derivatives, soya bean and its derivatives, crude palm oil and moong," the Ministry said in a notification.
Industry insiders opined that the move is in consonance with the Centre's goal to drive down inflation while maintaining a growth oriented liquidity stand.
Macro-data, released earlier this month, showed that higher prices of commodities, food items and fuels lifted India's November consumer and wholesale inflation gauges.
According to data, CPI inflation jumped to three-months high of 4.9 per cent which was led by higher core inflation.
Similarly, the annual rate of inflation, based on wholesale prices, rose to a new record high of 14.23 per cent last month from 12.54 per cent in October.
According to a CNBC report, Google's Vice President of compensation, Frank Wagner, told employees in a meeting that the company does not "have any plans to do any type of across-the-board type adjustment" when asked about the inflation rate in the US.
Alphabet and Google CEO Sundar Pichai asked at the meeting: "With the US inflation rates being as high as seven per cent, some companies are doing blanket salary adjustments to cover just the inflation. Is there any plans for Google to do the same thing?"
Wagner replied: "Inflation does seem to be top of mind for a lot of folks, and I think one of the reasons is that people are pretty eager to get their compensation awards".
However, Google "won't introduce company-wide adjustments for inflation".
"We don't have any plans to do any type of across-the-board type adjustment," he was quoted as saying in the report on Friday.
In a statement, a company spokesperson said: "Employees receive bonus and equity as part of their total compensation, which also includes generous benefits and flexibility".
Google parent Alphabet has more than 150,000 full-time employees globally, and has seen its revenue and stock soar over the last year.
Alphabet announced its fifth quarter in a row of record profits ($18.9 billion) and second straight quarter of record revenue ($65.1 billion) in October.
The trend has not only hurt the economically weaker section of the society but has lately been cited to impact the savings rate of the well-off. The biggest impact of inflation is that it affects the purchasing power of the fixed income groups as they can buy less compared to what they were buying earlier.
However, even as consumer price-based inflationary pressure has eased lately on a macro level, it is still high enough to hamper the financial health of any middle class Indian family.
Notably, the CPI-indexed inflation has come down to 6 per cent which is in the comfort zone of the Reserve Bank of India.
But some items of CPI as well as wholesale price inflation (WPI) have shown a drastic increase such as transport fuel prices.
Significantly, any rise in fuel costs bumps-up prices of nearly all the essential items because of a second-round effect. A rise in fuel rates typically impacts overall freight and transportation costs.
Rahul Kumar, 28, who commutes to work in Noida on his two-wheeler, says that the rise in petrol prices exhausts his monthly income rather help him accumulate his savings.
"The rise in petrol prices to above Rs 100 per litre, of tomatoes at Rs 80 per kg, besides ever rising rents could not have come at a worse time since we are already having pay cuts," he said.
"The high spend on petrol due to exorbitant prices itself depletes my income. There has been no savings or investments for at least the last two years."
Similarly, Chabilal Das, a middle-aged daily essential supplier in Noida, also expressed concerns about the rise in prices.
"My income has gone down drastically post pandemic as many few people working in formal sectors have returned to the city as they have work from home options. They are my target customers. How will I pay my EMIs now, that has now become my biggest headache," Das said.
Anil Kumar, 40, a Delhi-based cab driver, said rising fuel prices have hurt his cost-to-income margins.
"Rising fuel prices have hurt us the most as we need to pay EMIs of our vehicle loans, which becomes difficult due to a fall in real income. This pandemic has hit us hard," Kumar said.
Besides, a spike in commodity prices globally inflated the manufactured goods' cost thereby hurting margins along with end users.
Acuite Ratings and Research's Chief Analytical Officer Suman Chowdhury said: "Some categories in the food basket have seen heightened inflation in the current year which includes edible oil, egg, meat and fish and pulses. Further, the sharply increased prices of petrol and diesel have also increased household expenditures with the unlocking of the economy."
"However, it needs to be mentioned that the higher retail fuel prices have got offset to an extent as many salaried employees still have the flexibility to work from home. Going ahead, there is a risk that as the economy continues to unlock and demand for contact intensive services such as hospitality and leisure increases, the inflation in services may see a surge."
Chowdhury sees India's headline inflation at 5.5 per cent for overall FY22 fiscal, and at 6 per cent in particular for Q4FY22.
AMRG and Associates Senior Partner Rajat Mohan said: "The negative effects include impeding purchasing power, inequality in income distribution increases, it negatively impacts the export income as the export prices increases; leading to falling in foreign demand, elevated interest rates in the long run and reduction in the savings rate."
"The energy sector, food processing sector, goods and commodities sector, automobile industries, real estate sector continuously agitate with inflation predisposing middle-class families to financial crisis and instability."
However, WPI inflation remained in double digit for the third consecutive month in June, mainly due to a low base of last year. WPI inflation was (-) 1.81 per cent, in June 2020.
Snapping the five straight months of uptick, the wholesale price index (WPI)-based inflation in June softened as prices of food articles and crude oil eased, even though manufactured products hardened.
"The annual rate of inflation is 12.07 per cent for the month of June, 2021 (over June, 2020) as compared to 1.81 per cent in June 2020.
"The high rate of inflation in June 2021, is primarily due to low base effect and rise in prices of mineral oils viz petrol, diesel (HSD), naphtha, ATF, furnace oil etc, and manufactured products like basic metal, food products, chemical products etc as compared the corresponding month of the previous year," the Commerce and Industry Ministry said.
Inflation in fuel and power basket eased to 32.83 per cent during June, against 37.61 per cent in May.
Inflation in food articles too eased to 3.09 per cent in June, from 4.31 per cent May, even as onion prices spiked.
In manufactured products, inflation stood at 10.88 per cent in June, against 10.83 per cent in the previous month.
The RBI in its monetary policy last month kept interest rates unchanged at record lows and committed to maintain an accommodative policy stance to support growth.
Retail inflation remained above the RBI's comfort level of 6 per cent for the second straight month at 6.26 per cent in June, data released earlier this week showed. PTI JD
DRR
In her address at the G20 High-Level Tax Symposium on Tax Policy and Climate Change, ahead of the third G20 Finance Ministers & Central Bank Governors Meeting, she also said that concessional tax rates are in place in India to promote use of renewables.
In a series of tweets, the Ministry of Finance said that the minister shared India's innovative policy mix for better environmental outcomes such as new energy map of India, digital innovation and emerging fuels, international solar alliance for enabling clean energy, and promotion of energy efficiency and afforestation.
Sitharaman also emphasised on the role of technology in fighting climate change and called for international cooperation to increase supply of alternative sources of energy and technologies for adaptation.
FM Smt. @nsitharaman shared India’s innovative policy mix for better environmental outcomes such as new #EnergyMapofIndia, digital innovation and emerging fuels; @isolaralliance for enabling clean energy; promotion of energy efficiency & afforestation. (3/4)
— Ministry of Finance (@FinMinIndia) July 9, 2021
FM Smt. @nsitharaman emphasised on the role of #technology in fighting #ClimateChange & called for international cooperation to increase supply of alternative sources of energy & technologies for adaptation. (4/4)
— Ministry of Finance (@FinMinIndia) July 9, 2021
The third meeting of G20 Finance Ministers and Central Bank Governors is scheduled on July 9 and 10, under the Italian G20 presidency. This will be the first in-person Finance Track meeting since February 2020.
Forex Reserves Rise By USD 1.013 Bn To Record High Of USD 610.012 Bn
Meanwhile, the country's foreign exchange reserves swelled by USD 1.013 billion to touch a lifetime high of USD 610.012 billion in the week ended July 2, RBI data showed on Friday.
In the previous week ended June 25, 2021, the reserves had jumped by USD 5.066 billion to reach USD 608.999 billion.
During the reporting week, the rise in the forex kitty was mainly on account of an increase in foreign currency assets (FCA), a major component of the overall reserves.
FCA surged by USD 748 million to USD 566.988 billion, as per weekly data by the Reserve Bank of India (RBI).
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
Gold reserves climbed USD 76 million to USD 36.372 billion in the reporting week.
The special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by USD 49 million to USD 1.548 billion.
The country's reserve position with the IMF too increased by USD 139 million to USD 5.105 billion in the reporting week, the data showed.
The Monthly Economic Review for June 2021 released by the Department of Economic Affairs (DEA) noted that inflationary pressures took an upturn in May 2021 with headline inflation (CPI-C) and WPI inflation touching a high of 6.3 percent and 12.94 per cent, respectively.
Supply side disruptions in states and unfavourable base effects drove the broad-based momentum in retail inflation across food, fuel and core categories. On the other hand, electricity and manufactured products inflation led the uptick in wholesale inflation.
Healthy monsoon coverage, gradually rising Kharif sowing and unlocking of states is expected to ease food, and thereby headline, inflation, it said.
"However, risks due to global demand-led recovery in commodity prices and input cost pressures remain," it said.
As the Indian economy struggles to shed the impact of the second wave of Covid-19, the report suggested that maintaining a fast past of vaccination and plugging the lags in the healthcare infrastructure in the country would be the most sustainable stimulus for the durable recovery of the Indian economy.
Resilient tax collections of the Central government in the first two months of FY 2020-21 and sustained momentum in capital expenditure, particularly in the road and rail sector, augurs well for continued economic recovery driven by capital expenditures, it said.
The recently announced economic relief package is expected to further oil the wheels of the capex cycle via implementation of the PLI scheme and streamlining of processes for PPP Projects and Asset Monetisation, the review said.
Consumption sentiment is expected to pick up with further enhancement of employment support under the Aatma Nirbhar Bharat Rozgar Yojana (ANBRY), targeted support to the urban poor through the credit guarantee scheme for on-lending by micro-finance institutions, and wider Bharat-Net digitisation coverage.
Free food-grain and enhanced fertiliser subsidies under the package along with continued MGNREGA implementation, on the other hand, would serve as a cushion for rural demand in the coming quarters, the review said.
As per the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry, December's inflation rate was higher than the rise of 3.58 per cent reported for the corresponding period of 2017.
"The annual rate of inflation, based on monthly WPI, stood at 3.80 per cent (provisional) for the month of December, 2018 (over December, 2017) as compared to 4.64 per cent (provisional) for the previous month and 3.58 per cent during the corresponding month of the previous year," the Ministry said in its review of "Index Numbers of Wholesale Price in India" for December.
"Build up inflation rate in the financial year so far was 3.27 per cent compared to a build up rate of 2.21 per cent in the corresponding period of the previous year."
On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, rose to 2.28 per cent last month, from a rise of 0.88 per cent in November.
Similarly, the prices of food articles accelerated. The category has a weightage of 15.26 per cent in the WPI index. It deflated by (-) 0.07 per cent from (-) 3.31 per cent.
However, the cost of fuel and power segment, which commands a 13.15 per cent weightage, increased at a slower pace of 8.38 per cent from a growth of 16.28 per cent.
The expenses on manufactured products registered a rise of 3.59 per cent from 4.21 per cent.
On a YoY basis, onion prices deflated by (-) 63.83 per cent, whereas potatoes became dearer by 48.68 per cent.
In contrast, the overall vegetable prices in the month under review declined by (-) 17.55 per cent, against a rise of 56.38 per cent in the same month a year ago.
Among the non-food items, the price of high-speed diesel rose by 8.61 per cent on a YoY basis, petrol by 1.57 per cent and LPG by 6.87 per cent.
The sharp deceleration in the rate of India's industrial output growth is also expected have an impact on investors' sentiments.
Additionally, global cues such as concerns over the rise in crude oil prices and trade talks between the US and China, along with the direction of foreign fund flows, will affect the risk-taking appetite of investors.
"Going forward, the market will closely watch guidance and management commentary of the companies coming out with their earnings," SMC Investments & Advisors CMD D.K. Aggarwal told IANS.
"Besides, third quarter results, macroeconomic data, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar and crude oil price movement will dictate the trend of the market going forward."
In the coming week, companies like Reliance Industries, Cyient, Hindustan Unilever, Rallis India, ICICI Securities, Multi Commodity Exchange of India, Mindtree, SBI Life Insurance Company and Wipro are expected to announce their Q3 earning results.
According to Sahil Kapoor, Chief Market Strategist, Edelweiss Investment Research: "The breadth of the market suggests that the underlying strength of the broader market is still absent. NSE500 Index which is much broader than the Nifty is still trading below its 200DMA."
"As we move into the thick of the result season the index is likely to see a break of this trading range. If the index were to trade below 10,700 mark a fall towards 10,400 to 10,500 range is likely and a retest of 2018 lows would also rise in probability."
Apart from the Q3 results, investors will look out for the upcoming macro-economic data points such as CPI (Consumer Price Index), Wholesale Price Index (WPI) and
and the Balance of Trade figures.
The Central Statistics Office (CSO) is slated to release the macro-economic data points of CPI (Consumer Price Index) on Jan 14.
Besides, a volatile rupee against the US dollar might hamper market's northward moves.
"The rupee has got concerns from rising crude and risk of fiscal slippage in poll bound nation... any breach above 70.60 levels can take it to 71.50 levels. On the lower side 69.80 can be seen if any softness in crude is seen," said Edelweiss Securities' Head of Forex and Rates Sajal Gupta.
"Any positive development on resolution of global trade concerns can be a positive backdrop for rupee to appreciate in coming week."
On a weekly basis, the Indian rupee weakened by 77 paise to 70.49 against the US dollar from its previous close of 69.72.
In addition, direction of foreign fund flows will be the another major theme for the equity market.
As per the provisional data released by stock markets, FIIs remained net sellers to the tune of over Rs 500 crore during the week ended Friday.
Last week, the key Indian equity indices -- the BSE Sensex and the NSE Nifty50 -- rose despite a rise in global crude oil prices and heavy outflow of foreign funds, partly owing to an ease in liquidity and hopes of the US-China trade war being resolved.
Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the BSE gained 314.74 points, or 0.88 per cent, to close at 36,009.84 points.
Similarly, the wider Nifty50 of the National Stock Exchange (NSE) made healthy gains. It closed trade at 10,331.60 points -- up 67.6 points, or 0.63 per cent, to settle at 10,794.95.
On a sector specific basis, the rise was supported by healthy buying in the state-owned banking stocks after Reserve Bank of India Governor Shaktikanta Das on Thursday held a meeting with heads of Mumbai-based public sector banks.
However, three days of upward movement gave investors a chance to book profits, capping the session's gains.
Apart from banking stocks, most sectoral indices, especially interest-sensitive -- auto and capital goods -- shares on the BSE and NSE ended in the green.
Globally, major Asian markets closed on a positive note. European indices like FTSE 100, DAX and CAC 40 also traded in the green.
"In anticipation of some firm measures by the new RBI Governor to ease the credit squeeze, the markets rallied in the morning but cooled off in the 2nd half on some profit booking," said Essel Mutual Fund CIO, Viral Berawala.
"Stocks with rural focus also gained momentum on expectations of some pro-rural announcements by the central government."
Said Geojit Financial Services' Head of Research Vinod Nair: "Benign CPI inflation at 2.3 per cent supported an improvement in RBI's current stance of 'calibrated tightening'.
"Additionally, pick up in industrial production at 8.1 per cent supported the continuation of the rally. Ease in US-China tensions and the UK PM wining the vote of confidence brought stability in the global market."
The Nifty PSU Bank index gained 1.03 per cent. Banking stocks also rose as RBI is scheduled to purchase government securities and infuse liquidity worth Rs 10,000 crore on Thursday.
Index-wise, the Sensex settled 150.57 points up at 35,929.64 points, touching an intra-day high of 36,095.56 and a low of 35,794.51. The Nifty50 gained 53.95 points or 0.50 per cent to closed at 10,791.55.
In terms of broader markets, the BSE Mid-cap rose 0.82 per cent while the BSE Small-cap was down 0.65 per cent. The BSE market breadth was positive with 1,493 advances against 1,058 declines during the day.
On the currency front, V.K. Sharma, Head PCG and Capital Markets Strategy, HDFC Securities, said: "Rupee started on a stronger note following better than expected economic data. The inflation for November came at 2.33 per cent from previous months' 3.38 per cent, the slowest pace in 17 months.
"The sentiment got a boost on stronger domestic equity markets and weakening of the US dollar against G-10 currencies."
The rupee settled at 70.68-69 per US dollar from Thursday's close of 70.86.
"Technically, with the Nifty rallying higher for the third consecutive session, the bulls remain in control. Further upsides are likely once the immediate resistances of 10,839 are taken out," said HDFC Securities' Retail Research Head Deepak Jasani.
"Crucial supports to watch for any weakness are at 10,750."
Foreign Institutional Investors (FII) bought shares worth Rs 675.14 crore on Thursday while Domestic Institutional Investors (DII) sold stocks worth Rs 51.86 crore, provisional data from the BSE showed.
Stock wise, Yes Bank shares fell by 6.48 per cent, the most among the 30 shares on Sensex. Shares of the private lender declined steeply after its Board on Thursday could only finalise the Non-Executive Part-Time Chairman position.
Stock-wise, Wipro, Infosys, Kotak Mahindra Bank and Maruti Suzuki gained over 2 per cent. In contrast, Sun Pharma lost 2.12 per cent and TCS, Tata Steel and Adani Ports declined in the range of 1 to 2 per cent.
Consequently, the S&P BSE Sensex was up by 0.99 per cent and the NSE's Nifty5O ended 1.28 per cent up from its previous close.
Index-wise, the Nifty50 of the National Stock Exchange (NSE) closed at 11,515.20 points, higher by 145.30 points or 1.28 per cent from its previous close of 11,369.90 points.
The barometer S&P BSE Sensex, which had opened at 37,939.29 points, closed at 38,090.64 points, higher by 372.68 points or 0.99 per cent from its previous close of 37,717.96 points.
It touched an intra-day high of 38,125.62 points and a low of 37,859.52 points.
In the broader markets, the S&P BSE Mid-cap rose by 1.62 per cent and the S&P BSE Small-cap ended 1.38 per cent higher from its previous close.
The BSE market breadth was bullish with 1,811 advances against 850 declines. The total number of stocks traded on the exchange was 2,831, with 170 ending unchanged.
"The gains came on the back of positive global cues. The sentiment was also buoyed after data showed inflation eased in August, thereby increasing the likelihood that the RBI will not increase interest rates in October," said Deepak Jasani, Head of Retail Research at HDFC Securities.
According to Vinod Nair, Head of Research, Geojit Financial Services: "Ease in inflation and recovery in rupee added optimism in the market."
"Stability in yield and rupee will be crucial for the market momentum while investors have continued to stay cautious due to global triggers. The global peers also traded on a positive note in expectation of ease in trade tensions between US and China. Any redressal in tensions will provide enough headroom for the domestic market."
On the currency front, the Indian rupee closed at 71.85, recovering 34 paise from its previous close of 72.19 per greenback.
Investment-wise, provisional data with the exchanges showed that foreign institutional investors bought scrip worth Rs 1,090.56 crore and domestic institutional investors bought stocks worth Rs 115.14 crore.
Sector-wise, all the indices closed in the green. The S&P BSE consumer durables index gained 458.43 points, the banking index gained 363.38 points and the metal index was up by 311.52 points from its previous close.
The top gainers on the Sensex were Vedanta, up 5.25 per cent at Rs 235.50; Power Grid, up 3.57 per cent at Rs 200.10; Asian Paints, up 3.04 per cent at Rs 1,331; NTPC, up 3 per cent at Rs 175; and Yes Bank, up 2.75 per cent at Rs 323.10 per share.
The losers were Coal India, down 1.42 per cent at Rs 277.30; Infosys, down 1.01 per cent at Rs 735.20 per share.
According to the Commerce Ministry data, the WPI inflation in March 2017 was more than double at 5.11 per cent.
"The annual rate of inflation, based on monthly WPI, stood at 2.47 per cent (provisional) for March 2018 (over March 2017) as compared to 2.48 per cent (provisional) for the previous month and 5.11 per cent during the corresponding month of the previous year," the ministry said in its report.
"Build up inflation rate in the financial year so far was 2.47 per cent compared to a build up rate of 5.11 per cent in the corresponding period of the previous year."
On a sequential basis, expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, inched up by 0.24 per cent, from an increase of 0.79 per cent in February.
The data disclosed that prices of food articles dipped by (-) 0.29 per cent from an acceleration of 0.88 per cent in the previous corresponding month.
On a year-on-year (YoY) basis, onion prices soared higher by 42.22 per cent whereas potato prices rose by 43.25 per cent.
In contrast, the overall vegetable prices in March deflated (-)2.70 per cent, against a fall of (-)0.50 per cent in the same month a year ago.
On April 12, the data released by the Central Statistics Office (CSO) showed that lower food prices eased March retail inflation to 4.28 per cent from 4.44 per cent in February 2018.
However, on a year-on-year (YoY) basis, the consumer price index (CPI) last month stood higher than the 3.89 per cent reported in March 2017.
The CSO data revealed that the consumer food price index (CFPI) stood at 2.81 per cent in March compared to 3.26 per cent in February 2018.
India Inc lauded the continuing high single-digit recovery in industry as well as the slight fall in inflation.
While retail inflation was 5.21 per cent in December 2017, the Index of Industrial Production (IIP) had grown at an impressive 8.8 per cent in November.
On a year-on-year basis, the consumer price index (CPI) last month was at a much higher level than the 3.17 per cent in January 2017.The consumer food price index (CFPI) in January stood at 4.58 per cent compared with the 4.85 per cent of December 2017.
As per the data released by the Central Statistics Office (CSO), the sequential slowdown in factory output was mainly on account of lower production in the manufacturing sector.
However, on a year-on-year basis, the manufacturing sector expanded by a healthy 8.4 per cent, while the mining sector's output inched up by 1.2 per cent and the sub-index of electricity generation increased by 4.4 per cent.
"In terms of industries, 16 out of the 23 industry groups in manufacturing sector have shown positive growth during December 2017 compared with corresponding month of the previous year," the CSO said.
According to the data, the industry group 'manufacture of other transport equipment' has shown the highest growth of 38.3 per cent followed by 33.6 per cent in 'manufacture of pharmaceuticals, medicinal chemicals and botanical products' and 29.8 per cent in 'manufacture of computers, elecronic and optical products'.
Last week, The Reserve Bank of India (RBI) kept its key interest rate unchanged at 6 per cent for the third time in succession at its final bi-monthly monetary policy review of the fiscal, citing upside risks for inflation from rising global crude oil prices and other domestic factors.
The RBI said its decision to keep its repo rate, or short-term lending rate for commercial banks, unchanged is consistent with the neutral stance of the central bank aimed at achieving its median inflation target of 4 per cent.
"We expect headline inflation to be at 5.1 per cent in the fourth quarter (January-March), including the impact of HRA (house rent allowance) to central employees, up from the 4.6 per cent in Q3," RBI Governor Urjit Patel told reporters in Mumbai after the release of the monetary policy review.
However, the fact that the central bank did not raise the repo rate in the face of hardening inflation as recommended by one of the six monetary policy committee (MPC) members is being considered as an attempt to aid in economic recovery.
Industry chamber Assocham termed the IIP data "a positive sign towards growth cycle of industrial activity in India".
"However, risks to the Indian economy continues to prevail in the forms of continued uncertainties in the global environment due to geo-political situations, including rising global protectionism could further delay a meaningful recovery of external demand," said Assocham President Sandeep Jajodia.
"Besides, private investment continues to face several impediments in the form of corporate debt overhang, stress in the financial sector, where (banks') NPAs (non-performing assets) continue to increase, excess capacity and regulatory and policy challenges," he added.
"This is the second consecutive month in which IIP has shown high single-digit growth, which is encouraging," India Ratings and Research (Ind-Ra) Principal Economist Sunil Kumar Sinha said in a statement.
"However, Ind-Ra believes it still early to read much from these numbers as these have been calculated on a low base when industrial output had collapsed due to the impact of demonetisation," he said.
"Retail inflation came down to 5.07 per cent in January 2018, lower than 5.21 per cent recorded last month, but remained higher than the RBI's base target value of 4 per cent," he added.
Rating agency Crisil said that inflation, however, continued to firm up in large parts of the services sectors such as housing, driven by the revision in house rent allowance payments, education and in recreation, amusement and personal care and effects.
"Yet, core inflation, stayed broadly unchanged from the previous month, at around 5.1 per cent in January," a Crisil release said.
"The industry seems to be shedding away the weight of GST-related glitches behind and trying to get back lost momentum, as both domestic and global growth surge."
According to data from the Ministry of Commerce and Industry, the wholesale price index (WPI), with the revised base year of 2011-12, stood at 3.93 per cent (provisional) for the month of November, 2017 as compared to 3.59 per cent (provisional) for the previous month and 1.82 per cent during the corresponding month of the previous year.
Consequently, the repo rate, at which it lends to banks, will stand at 6 per cent.
The reverse repo, at which RBI borrows from banks will continue to be at 5.75 per cent, it said at the fourth bi-monthly policy review.
In its last review in August it had slashed the benchmark lending rate by 0.25 percentage points to 6 per cent, the lowest in 6 years.
"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth," RBI said in its fourth policy review of 2017-18.
The six-member monetary policy committee voted 5:1 for the decision, with only Ravindra Dholakia voting for a 0.25 per cent reduction in rates.
The Reserve Bank of India (RBI) said that after a record low in June, inflation is trending up and estimated the headline number to touch 4.6 per cent by the March quarter.
"The MPC (Monetary Policy Committee) decided to keep the policy stance neutral and monitor incoming data closely. The MPC remains committed to keeping headline inflation close to 4 per cent on a durable basis," it said.
On growth, it cut its 2017-18 forecast by gross value added (GVA) basis to 6.7 per cent from 7.3 per cent earlier.
"The loss of momentum in Q1 of 2017-18 and the first advance estimates of kharif foodgrains production are early setbacks that impart a downside to the outlook. The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short-term," RBI said.
The MPC said structural reforms introduced in the recent period will likely be growth augmenting over the medium-to long-term by improving the business environment, enhancing transparency and increasing formalisation of the economy.
Markets were expecting the Monetary Policy Committee to vote for a status quo on the rates at the policy announcement.
They also felt that with inflation rising, the RBI is at the end of its rate cutting cycle and may cut it once at best during the remainder of the fiscal.
The review comes amid a heightened fears of a slowdown in growth due to various factors like the demonetisation exercise and the introduction of the indirect taxation reform GST and a shrill call for fiscal boosters from a varied section of economists.
The GDP expansion slowed down for the sixth straight quarter to 5.7 per cent which is a three year low under the new series of computation for the June quarter. However, data released yesterday said the core sector growth came at a 5- month high of 4.9 per cent for August, up from 2.9 per cent for July.
The government has been working on a plan to push up growth, but has not announced any move yet. It cut the excise duty on fuels by Rs 2 in order to minimise the impact of increasing global fuel prices on domestic consumers, a move which heightens the risk of a fiscal slippage.
Breaching the fiscal deficit is also seen as stoking inflation, the Reserve Bank s primary objective. The RBI is mandated to keep the headline inflation, which accelerated to 3.36 per cent for August, in the 4-6 per cent band.
Some analysts have been saying inflation has been off the lows and will be pushing up in the second half of the fiscal.
The central bank said it is imperative to reinvigorate investment activity which, in turn, would revive the demand for bank credit by industry as existing capacities get utilised and the requirements of new capacity open up to be financed.
"Recapitalising public sector banks adequately will ensure that credit flows to the productive sectors are not impeded and growth impulses not restrained," it said.
"During monsoon, there is a spike in vegetable prices. It is usually the highest level of inflation in the entire year. We have touched only 3.24 per cent. It is very reasonable and modest against the double digit inflation seen during the earlier UPA rule. In the last one year, consistently inflation is under 4 per cent target of the Reseve Bank of India's monetary policy committee," Jaitley told Times Now in an interview.
"We have brought down prices of essential commodities as a result of which the last three years have been the best phase of inflation management. A statutory monetary policy committee has set target of inflation management at 4 per cent," he said.
The annual rate of inflation, based on monthly WPI, stood at 3.24 per cent for August 2017 (over August 2016) compared with 1.88 per cent (provisional) for the previous month and 1.09 per cent during the corresponding month of the previous year, according to data released by the Commerce Ministry.
Fuel and power were the major contributors to the rise in wholesale inflation.
The Finance Minister added that prior to2014, during the UPA regime, the county was used to double digit inflation between 9-11 per cent.
The Indian basket of imported crude oils gained nearly $3.50 a barrel during last week even as petrol prices in the country touched their highest levels.
"It is because the global environment of slow down is impacting India. Despite we have maintained reasonable growth rate. There is absence of private investment because of the banking crisis attributable to the mindless loans given during UPA regime. Growth is based on larged foreign direct investment, public spending. India needs large public spending.
"Whatever revenue comes from fuel goes towards large amount of public spending. Do we not want rural roads to be built, highways to be built? Money collected as taxes from fuel doesn't go to government's pocket, but towards infrastructure creation," he said.
Jaitley said that the government was concerned over growth in the manufacturing sector.
"Certainly we are concerned. While service sector grew in the last quarter, manufacturing sector came down. If it was only because of demonetisation, it should have been across. It was in anticipation of Goods and Services Tax (GST) roll-out from July 1. People instead of adding to the manufacturing, were destocking," he said.
"I am hopeful with series of steps, investment environment is improved. Manufacturing in India should pick up," he added.
At its second bi-monthly monetary policy review of the fiscal on June 7, the RBI maintained status quo on its short-term rate for lending to commercial banks, at 6.25 per cent. In doing so, the policy statement said the six-member Monetary Policy Committee (MPC) was guided by the risks to inflation.
Retail inflation in India during June dropped to a record low of 1.54 per cent, while industrial production data showed that the growth in factory production fell to 1.7 per cent in May, from 8 per cent in the same month a year ago.
Industry chamber Assocham on Sunday urged the apex bank to cut interest rates in view of the latest macro data.
"Citing inflation at a five-year low and deceleration in the factory output, the Assocham has written to RBI Governor Urjit Patel, making out a strong case for at least 25 basis point cut in the policy interest rate when the RBI Monetary Policy Committee meets on August 2," an Associated Chambers of Commerce and Industry of India statement said here.
"The wholesale price index (WPI) also eased to 0.9 per cent from 2.17 per cent. The case for rate-cut is additionally strengthened by easing of food inflation to (minus)2.12 per cent from 0.31 per cent. Good monsoon forecasts for the current financial year have additionally created a stance for further reduction in the food inflation," Assocham said.
With inflation in India falling dramatically, British financial services major HSBC said cut in key policy rates is likely as the country's inflation differential with the world is normalising, inflation expectation is cooling and food prices are also falling.
"All considered, we continue to expect a 25 bps (basis points) rate cut in the August 2 meeting. We expect the central bank to maintain its neutral stance, which we believe is consistent with moderate rate cuts," HSBC said in a research note.
"We've said this before, and we have found new evidence since India may have already become a 4 per cent inflation economy," it said.
June was the fourth policy review in succession that the MPC had kept the repo rate unchanged.
Announcing status quo on the key interest rate, Patel said the abrupt fall in inflation in April "from the firming trajectory that was developing in February and March has raised several issues that have to be factored into the inflation projections.
"Considering the high uncertainty clouding the near-term inflation outlook, there is a need to avoid premature policy action at this stage. Premature action at this stage risks disruptive policy reversals later and the loss of credibility." he said.
The MPC has the mandate of achieving the medium-term target for consumer price index (CPI)inflation of 4 per cent within a band of 2 per cent either way.
Since the MPC started setting rates in October last year, the June policy review was the first time it did not take a unanimous decision, with five members voting in favour of holding the rate and one opposing.
The sole dissenting external member and IIM-Ahmedabad faculty Ravindra Dholakia voted for a minimum 50 bps cut in the repo rate.
Three of the six members of the MPC are government nominees, while the others are from the RBI.
Following the June monetary policy decision, Chief Economic Advisor Arvind Subramanian felt the central bank had overstated the risks on inflation, noting the inflation outlook has been benign, while growth in the economy has decelerated along with slowdown in private investment, credit growth and gross capital formation.
"Seldom have economic conditions and outlook pointed so strongly towards monetary policy easing," he told reporters then.
A State Bank of India (SBI) report said that most inflation risks are now on the downside and retail inflation is expected to be below 3 per cent for August-September, under 4 per cent for October-November, and between 4-4.5 per cent for December to March next year.
According to an American expert, Indian policymakers would do well to target keeping annual retail inflation in the country in the range of 4-5 per cent without aiming to lower this rate significantly.
"Many people in the advanced economies are saying we should have been at 4 per cent (inflation rate), and not be at 2 per cent, which was a mistake. There is a debate on," Professor of Economics at Harvard University Kenneth Rogoff told a news channel here, referring to the prolonged phase of low inflation coupled with low growth being experienced by Western economies.
"I think that if a lot of countries were starting from scratch, I bet they would opt for a 3 per cent target," he said, adding that there were a "number of reasons for India, not to bring it (inflation) down too quickly."
"India should target inflation at 4-5 per cent," Kenneth Rogoff, Professor of Economics at Harvard University in the US told BTVi in an interview.
"Many people in the advanced economies are saying we should have been at 4 per cent (inflation rate), and not be at 2 per cent, which was a mistake. There is a debate on," he said referring to the prolonged phase of low inflation coupled with low growth being experienced by Western economies.
"I think that if a lot of countries were starting from scratch, I bet they would opt for a 3 per cent target," he added.
Noting "there is no rush to come down to a lower inflation target, the American economist said it is "predictability" that is important in keeping down inflationary expectations.
"In economic theory, which who knows if its true...historically it has been seen that if you are predictable, that's what people expect. People can adjust to any steady inflation rate," Rogoff said.
"There are number of reasons for India, not to bring it (inflation) down too quickly," he added.
The 10-day snapshot could reflect the trend in consumer price index (CPI), a main gauge of inflation, as food prices account for nearly one-third of the prices used in calculating the index, Xinhua news agency reported.
Prices of pork, beef and mutton posted decline from last sampled period of March 11 to March 20, according to data released by the National Bureau of Statistics (NBS).
Cucumber led the fall in vegetable prices by losing 6.4 per cent, while canola and soybean oil prices dipped by 0.4 per cent.
Weakening food prices were expected to drag down the March CPI, which is was expected to grow by about 0.8 per cent year on year, according to an earlier report by the Bank of Communications.
The official CPI in March is due to be released by the NBS on April 12.
"I have already announced this year and I am keen to implement it. It is in final stages. How do we legitimise political funding in India so that the underground funding itself comes to an end and an alternate mechanism is set in," he said at the book release titled 'India@70 Modi@3.5'.
As per the electoral bond mechanism announced in the budget, the proposed bonds will resemble a promissory note and not an interest-paying debt instrument.
They will be sold by authorised banks and can be deposited in notified accounts of political parties within the duration of their validity.
The bonds will not carry the name of the donor and routing of the money through banks will ensure that only tax paid money comes into the political system.
Jaitley also said that the government is trying to maintain a balance between accelerating the pace of economy and taking care of the needs of the poor.
So, getting cross sections on the government's side and arousing a new confidence in them has been the basic tenor of this government in the past 3.5 years, he said.
On price rise, he said, this government inherited inflation of 9-10 per cent and subsequently brought it down to a respectable level.
On the criticism of rising inflation by the opposition, he said, "3.36 per cent is also inflation (to them). Of course, system needs inflation otherwise economy will go into a recession."
He also said the Modi-led government brought down the fiscal deficit and current account deficit and maintain the rupee at the appropriate value.
"Opening of the economy step by step. We not only opened up several sectors we made the entry smoother...India attracted highest level of FDI year after year," he said.
This is the first rate cut since October 2016 and the interest rate is now at 6-year low.
In line with record low retail inflation, the RBI Governor headed Monetary Policy Committee (MPC) cut policy repo rate by 25 basis points to 6 per cent and the reverse repo by similar proportion to 5.75 per cent.
The MPC has also decided to keep the policy stance neutral and to watch incoming data with a view to keeping headline inflation close to 4 per cent.
It stressed on urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana.
RBI said it is working in close coordination with the government to resolve large stressed corporate borrowings and recapitalise public sector banks.
This is the lowest level of Consumer Price Index (CPI) based inflation since the government started computing the new series of data in January 2012. It stood at 5.52 per cent in October 2014, while same was over double the current level at 11.16 per cent in November 2013.
The food inflation also came down to 3.14 per cent in November as against 5.59 per cent in the previous month.
Retail prices of vegetables declined by 10.9 per cent as against a decline of 1.45 per cent in October, according to the data released by the Ministry of Statistics and Programme Implementation today.
Price rise in fruits slowed to 13.74 per cent from 17.49 per cent in October.
However, the rate of inflation in protein-rich items like eggs, fish and meat was at 6.48 per cent in November, slightly higher from 6.34 per cent in the previous month.
The Reserve Bank in the recent past has focussed on retail inflation while deciding its monetary policy, but there have been no rate cut for many months.
RBI has been targeting a retail inflation of 8 per cent by March 2015 and 6 per cent by January 2016.
In its monetary policy review earlier this month, the Reserve Bank kept its key repo rate unchanged at 8 per cent and cash reserve ratio (CRR) at 4 per cent.
"...if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle," RBI Governor Raghuram Rajan had said.
The August inflation, measured by Wholesale Price Index (WPI), declined from 5.19 per cent in July, while the same was 6.99 per cent in the same month last year.
The August WPI inflation is the lowest since October, 2009 when it stood at 1.8 per cent.
According to the official data released today, inflation in the food segment saw a significant decline to 5.15 per cent in August from 8.43 per cent in July.
Vegetable prices contracted 4.88 per cent in August, registering the third continuous month of decline. Onion prices were down by 44.7 per cent.
Potato prices, however, were on the rise as inflation in the kitchen essential jumped to 61.61 per cent in August from 46.41 per cent in July.
With WPI inflation coming down to five-year low level, India Inc has raised the pitch for lowering of the interest rate to boost industrial output that slipped to four month low of 0.5 per cent in July.
Speaking at a function in Mumbai, Reserve Bank Governor Raghuram Rajan, however, said prices across the board have to come down to enable the central bank to cut key rates.
"There is no point in cutting interest rates to see inflation picking up again," he said, adding that right now he thinks the RBI is continuing the way it proposed recently.
The RBI is targeting a retail inflation of 8 per cent by January next year and six per cent by January, 2016.
The retail inflation, measured on Consumer Price Index, (CPI) had also eased to 7.8 per cent in August compared to 7.96 per cent in July.
It was at 5.43 per cent last month and 5.84 per cent in July 2013.
Inflation in the overall food articles basket, which account for 14 per cent of the total Wholesale Price Index (WPI), stood at 8.43 per cent. It was at 8.14 per cent in June.
Inflation in vegetables declined 1.27 per cent, and for onion it was (-)8.13 per cent on an annual basis in July, as per the WPI data released on Thursday.
However, potato prices shot up 46.41 per cent and fruits 31.71 per cent during the month. Rate of price rise in milk was at 10.46 per cent.
Inflation in the egg, meat and fish category stood at 2.71 per cent in July as against 10.27 per cent in the previous month.
While the rate of price rise in pulses was 3.31 per cent, it was at 4.46 per cent for cereals. In rice it was 6.85 per cent and wheat 1.02 per cent in July.
Inflation in the manufactured products was at 3.67 per cent, and non-food articles, which include fibre, oil seeds and minerals, at 3.32 per cent.
Inflation in the fuel and power category, meanwhile, was down at 7.40 per cent from the previous month.
The WPI inflation data was revised upwards for May to 6.18 per cent, from 6.01 per cent as per provisional estimates.
The Reserve Bank in its monetary policy review last week had cautioned that continued uncertainty over monsoon could stoke food inflation, but expressed the hope that government policies will improve supplies in the coming months.
Retail inflation data for July, released earlier this week, showed a marginal inch up to 7.96 per cent.
Overall inflation in the food basket, including beverages, slowed to 8.57 per cent in February from 9.9 per cent in the previous month, according to Consumer Price Index (CPI) data released by the government today.
The rate at which vegetable prices increased eased to 14.04 per cent as against 21.91 per cent in January.
Prior to the month under review, the lowest CPI was recorded in January 2012 at 7.65 per cent, which inched up to 8.83 per cent in the following month. Retail inflation was at 8.79 per cent in January.
Retail or consumer inflation also slowed in protein-rich items such as eggs, fish and meat to 9.69 per cent in February versus 11.69 per cent in January.
The rate of price rise slowed to 9.93 per cent for cereals and related products from 11.42 per cent in January.
However, the pace of price increases for milk and its products picked up in February to 10.37 per cent from 9.82 per cent in the previous month.
The prices of fruits, condiments and spices also rose faster last month.
The RBI, which has maintained a hawkish interest rate regime to tame inflation, is scheduled to announce the next monetary policy on April 1. Industry has been demanding a cut in interest rates to boost economic growth, which has slowed to a decade-low level.
Retail inflation has been easing for three months. The CPI data showed inflation rates for rural and urban areas were at 8.51 per cent and 7.55 per cent, respectively.
In January, the wholesale price inflation rate fell to an eight-month low. Wholesale inflation data for February will be out on Friday.
The second straight month of deceleration in inflation as measured by the wholesale price index also gives a breather to the Reserve Bank, which has been trying to tame rising prices.
WPI inflation was at 6.16 per cent in December compared with 7.52 per cent in November.
January's inflation rate is the slowest since May 2013, when wholesale prices increased 4.58 per cent.
Inflation in food articles in January came down to 8.8 per cent as against 13.68 per cent in the preceding month, according to data released today.
"Food inflation remains elevated in spite of the overall favourable monsoon and agricultural production scenario, highlighting the demand-supply gaps and issues related to the supply chain," ICRA Senior Economist Aditi Nayar said.
As per the WPI data, prices of vegetables rose 16.6 per cent in January compared with a 57.33 per cent increase in December.
Onion prices climbed 6.59 per cent compared with a 39.56 per cent increase in December. Potato prices climbed 21.73 per cent in January.
Fruits were cheaper, as were protein-rich items such as eggs, meat and fish. However, inflation in milk inched up slightly to 7.22 per cent in January.
Data released this week showed retail inflation declined to a two-year low of 8.79 per cent in January, while industrial output in December shrank 0.6 per cent, prompting calls by industry for an interest rate cut to boost growth.
"We must and very urgently concentrate on reviving growth for the manufacturing sector and lay special emphasis on resolving problems of the MSME sector also," Ficci President Sidharth Birla said.