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BUSINESS EYE AUGUST 25, 2023 | The Indian Eye 38

Growth gathers momentum in Q2 of

year as rising inflation keeps prices high

Retail inflation in India rose sharply in July to 7.44 per cent and in the process
breached RBI’s 6 per cent upper tolerance target

OUR BUREAU
Mumbai/New Delhi

ndian economy is gathering mo-
mentum in the second quarter,
Ithough inflation would continue
to average above the central bank’s
comfort zone of 6 per cent. The con-
sumer price index (CPI) based retail
inflation shot up significantly to 7.44
per cent in July, from 4.87 per cent
in the preceding month, mainly due
to soaring prices of tomato, vegeta-
bles and other food items.
In his address to the nation on
the Independence Day, Prime Min-
ister Narendra Modi vowed to take
more steps to contain price rise.
The uptick in inflation in its
June reading mutated in July, with
the unprecedented shock to tomato
prices spilling over to prices of other
vegetables, said the article on ‘State
of the Economy’.
“While core inflation witnessed
a moderation, headline inflation is
expected to average well above 6 per
cent in the second quarter,” said an
article in the RBI’s monthly bulletin
released on Thursday.
The article has been authored by
a team lead by Reserve Bank Deputy Tomatoes prices have reportedly hit a record high of Rs 150-200 per kg at several markets across the country (ANI)
Governor Michael Debabrata Patra.
The article further said that In June too, the overall retail “We now expect inflation to rise RBI’s 6 per cent target for three con-
with industrial production and trade inflation too rose considerably to in the near term before moderating secutive quarters and had managed
weakening, the global recovery is 4.87 per cent due to a rise in vege- to below 6 per cent from November. to fall back to the RBI’s comfort
slowing after a robust first quarter table prices. Back in May, the retail As such we do not expect rate easing zone only in November 2022.
performance. “In this stressed global inflation was at 4.25 per cent, hitting to start until 2Q24. Liquidity man- After the August monetary pol-
environment, the Indian economy is a two-year low. It was at 4.7 per cent agement will likely remain the focus icy meeting, the Reserve Bank of
gathering momentum in the second in April and 5.7 per cent the previ- in RBI’s inflation fight,” it said in a India too upwardly revised the coun-
quarter of 2023-24,” it said. ous month. report authored by economists Upa- try’s retail inflation projections for
Domestic drivers such as private The latest rise in inflation could sana Chachra and Bani Gambhir. 2023-24 at 5.4 per cent, against 5.1
consumption and fixed investment partly be attributed to the current Notably, retail inflation (Con- per cent it projected in its previous
are offsetting the drag from the con- spurt in tomato and other vegetable sumer Price Index) in India peaked monetary policy meeting in June.
traction in exports, it added. prices across India. The rise in toma- at 7.8 per cent in April 2022, driv- A “substantial increase” in head-
Meanwhile, Morgan Stanley ex- to prices is reported across the coun- en by a reduction in food and core line inflation would occur in the near
pects retail inflation to moderate to try, and not just limited to a particu- inflation. In some advanced coun- term, said RBI Governor Shaktikan-
Reserve Bank of India’s 6 per cent lar region or geography. In key cities, tries, inflation had in fact touched ta Das as part of his remarks after
upper tolerance target only from it rose to as high as Rs 150-200 per kg. a multi-decade high and even the policy meeting.
November. Retail inflation in India Taking into consideration the breached the 10 per cent mark. He reiterated what he said after
rose sharply in July to 7.44 per cent latest uptick in the retail inflation RBI’s consistent monetary pol- the June meeting – “Bringing head-
and in the process breached RBI’s figures, Morgan Stanley upwardly icy tightening since mid-2022 could line inflation within the tolerance
6 per cent upper tolerance target, revises India’s inflation outlook for be attributed to the substantial de- band is not enough; we need to re-
largely due to a sharp spurt in vege- 2023-24 to an average of 5.7 per cent cline in inflation numbers in India. main firmly focused on aligning in-
table, fruit, and pulses prices. from 5.4 per cent earlier. India’s retail inflation was above flation to the target of 4.0 per cent.”

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