Vegetables’ contribution to retail inflation surged to a 42-month high in July while that of tomatoes rose to a 65-month high, unexpectedly taking the headline figure beyond the 7% mark for the first time in nearly a year, a Mint analysis showed. One-third (32%) of the total year-on-year (y-o-y) shift in the Consumer Price Index (CPI) in July came from the sharp rise in vegetable prices alone, with more than half of this coming from tomatoes, posing a dilemma for the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) that has held rates steady since April.
On a y-o-y basis, overall retail prices rose 7.4%, vegetable prices rose 37%, and tomato prices tripled last month, data released on Monday showed. However, all items have different weights in the retail inflation basket based on their consumption levels. Hence, an item’s contribution to inflation becomes a more useful way to assess its impact in lifting overall household budgets relative to other items.
The 7.4% inflation print released Monday shocked economists, who had anticipated a rise but not to this extent. A Mint poll of 19 economists had predicted the figure at 6.5%.
Source: livemint.com
