Inflation up, trade deficit widened in July

New Delhi: Retail as well as wholesale inflation turned sharply higher in July, but remained far below the RBI’s comfort level of 4 percent , leading to the chorus of lower rates getting louder.
Retail inflation as measured by the consumer price index (CPI) jumped to 2.36 percent in July on a yearly basis after easing for three straight months. The rise in CPI was chiefly driven by hardening of prices in sugar and confectionery items, pan, tobacco and intoxicants. However, there was disinflation in the food basket.
The RBI, which factors in CPI for arriving at its monetary policy, had earlier this month slashed the key interest rate (repo rate) by 25 basis point to 6 percent . However, the industry expects a bigger rate reduction. According to the CPI data released by the Central Statistics Office, food inflation saw deflationary pressure at (-)0.29 percent in July as against (-)2.12 percent in June this year.
Another macro-economic indicator for July showed that the wholesale price index (WPI) inflation rose sharply to 1.88 percent —first rise in five months — as some food articles turned dearer. On the inflation data, Economic Affairs Secretary Subhash Chandra Garg tweeted: “Both WPI and CPI inch up in July at 1.88 percent and 2.4 percent year on year. But still below the comfort level of 4 percent .”
Meanwhile, trade data for July released by the Commerce Ministry revealed that exports growth slowed to eight-month low of 3.94 percent in July while trade deficit widened to $11.44 billion on account of high gold imports. The country’s overseas shipments aggregated $22.54 billion in July 2017 against $21.68 billion in the same month last year. It is the lowest export growth since November 2016 when shipments had expanded by 2.29 percent . Thereafter, the growth had risen to 27.59 percent in March before it started to decelerate.
Imports rose by 15.42 percent to $34 billion in July, from $29.45 billion in the year-ago month, due to a jump in inward shipments of crude oil and gold. Gold imports firmed up 95 percent to $2.1 billion in July against $1.07 billion in the same month last year. — PTI

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