Consumers hit as India’s retail inflation surges to 7.44% in July
India’s retail inflation rocketed to 7.44% in in July, up from 4.87% in June, with consumers facing a 11.5% spike in food prices, according to National Statistical Office (NSO).
The figures represent the highest pace of retail inflation since April 2022 and the first time since September 2022 that it has been over 7%.
Food prices rose significantly, lifting the food bill by over 12.3% for urban consumers, while rural consumers encountered 11% food inflation. However, those living in rural areas faced a higher overall inflation rate of 7.63% in July, the NSO’s figures. The Consumer Price Index was up 2.9% from June’s levels, while food prices were up 6.7% month-on-month.
July’s inflation breaks the Reserve Bank of India’s 6% tolerance threshold for consumer price rises for the first time in four months, and threatens to break its 6.2% average inflation projection for the third quarter of 2023 (July to September).
“In its latest credit policy, the Reserve Bank of India [RBI] said it will be ready to act if conditions warrant action. Would 7% inflation for two successive months cause the trigger to be pulled?” said Bank of Baroda chief economist Madan Sabnavis. He added that a rise in interest rate hike cannot be ruled out, even though its probability is still low.
However, hopes of interest lower rates may be deferred further, with rating firm ICRA expecting the earliest cut around the second quarter of 2024-25 with “a fairly shallow” rate cut cycle of about 50-75 basis points from the current levels. One basis point equals 0.01%.
Wholesale prices remained in deflationary mode for the fourth month in a row in July, but prices of food and primary articles spiked by over 7.5%, narrowing the overall price dip sharply to -1.36% from the 92-month low of -4.1% recorded in June.
“The data for food prices for early August are not very promising, and we expect the headline CPI inflation to print above the 6.5% mark in August, before cooling off materially in September,” said ICRA chief economist Aditi Nayar.
“While the vegetable price shock may not reverse adequately before the next harvest, rainfall has been deficient in August so far, which is likely to put upward pressure on food prices, amid the lags in kharif sowing across some crops,” she added.
The Wholesale Price Index (WPI) moved up almost 2% from June’s levels, with primary articles rising over 8% and the Food Index up a 7.1%. Manufactured products’ prices fell 2.5%, while fuel and power prices fell a sharp 12.8% year-on-year, meaning the deflation in these two segments was just 0.3% and 0.5%, respectively. More than 80% of the rise in headline WPI in July compared with June was driven by primary food articles, ICRA said.
Indian accountants set to benefit from AI
Artificial intelligence and machine learning will help accountants increase their productivity and profitability, according Aniket Sunil Talati, President of the Institute of Chartered Accountants of India (ICAI).
He said AI will bring big changes to the accountancy profession, especially the audit sector. He commented: “If there is a good AI system, then there is so much one can look at in terms of transactions. AI will report back to you in terms of any deviations, red flags… and will play a huge role in assisting accountants to deliver high-quality audits.”
According to Talati, AI is going to change a lot of aspects and will help accountants look at a wider number of transactions. But he warned: “There are pitfalls also and you need to be trained to understand AI.”
Set up under an Act of Parliament, ICAI has more than 380,000 members and over 800,000 students.
