India’s retail
inflation rose 7% in August cutting short a three-month declining trend owing
to high food prices, government data released Monday showed.

The consumer price
index (CPI) based inflation was 6.7% in July and 5.3% in August 2021.

The Reserve Bank of
India, India’s central bank, has hardly been comfortable with recent CPI
numbers. This is the eighth month in a row when CPI has remained above 6%. RBI
factors in retail inflation while deciding on monetary policy.

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Food basket
inflation in August went up to 7.62% from 6.69% in July. Inflation has nearly
doubled from August last year when it was 3.11%. Fuel prices have gone up in
excess of 10% in case of vegetables, spices and footwear, and ‘fuel and light’
on an annual basis.

On the brighter
side, eggs saw a contraction in inflation while meat and fish remained flat.
India’s inflation numbers reached the highest 7.79% in April this year before
decelerating in the next months to 6.71% in July. The RBI has been asked by the
Union government to ensure CPI inflation remains at 4% with a 2% margin on each
side.

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RBI’s own
projections had shown inflation staying above 6% top end of its target until
2023.

Prices of pulses,
rice and wheat saw a rise in average prices on the back of a record-breaking
heatwave and squeezing household budgets. A lag in kharif sowing, that is crows
sown in autumn, has also raised inflationary pressures.

Metal prices on the
other hand have witnessed a sequential decline since the middle of June this
year, right after a number of major economies amid monetary tightening by
central banks.

According to Kunal
Kundu, an Indian economist at Societe Generale who spoke to Reuters, “Food
prices have actually gone up for major cereals, pulses and vegetables on an
annual basis because of the production challenges and shortfalls caused by a
blistering heatwave.”