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“Hike in inflation due to rise in food, fuel prices” Nirmala Sitharaman

India's Finance Minister Nirmala Sitharaman attends a joint news conference with U.S. Treasury Secretary Steven Mnuchin in New Delhi, India, November 1, 2019. REUTERS/Adnan Abidi

New Delhi, Sept 13- The mild increase in inflation between July and August, according to Finance Minister Nirmala Sitharaman, was brought mainly by rising food and fuel prices.

According to the finance minister, the impact of these restrictions is anticipated to be felt more strongly in the upcoming weeks and months. 

She said that the government had barred the export of food staples such wheat flour, rice, maida, etc. to maintain a consistent supply within the country.

“The headline inflation based on retail CPI recorded a moderate increase from 6.71 percent on July 22 to 7.0 percent on August 22. This increase is attributable both to an adverse base effect and an increase in food & fuel prices – the transient components of CPI inflation,” the Finance Minister said in a tweet.

She also said that core inflation, which is determined by calculating CPI without the transitory component, i.e. For the fourth consecutive month, the percentage of “food and beverages” and “fuel and light” was 5.9 percent, below the tolerance level of 6 percent.

“Prices of major inputs like iron ore & steel have sobered in the global markets,” the official continued, “and this, coupled with the measures taken by the Govt to rationalise tariff structures of inputs to augment domestic supply, has helped to keep cost-push inflation in consumer items under control.”

Despite the unpredictable monsoons and the negative seasonality in vegetable prices, Sitharaman said that food inflation in July was still lower than the year’s peak in April. With the pressures on inflation around the world, she continued, core inflation in India has remained constant.

Inflation predictions have dropped below 5% for the first time in 17 months, according to IIM-One-Year Ahmedabad’s Ahead Business Inflation Expectations Survey, which was released in July 2022.

Sitharaman said that despite unpredictable monsoons and a downward seasonal trend in vegetable prices, food inflation in July was still lower than the year’s April peak. Inflationary expectations are very firmly grounded in India despite the rising global inflation rate, she continued.

In another tweet, the minister said, “IIM-One-year Ahmedabad’s ahead Business Inflation Predictions Survey in July 2022 has reduced by 34 bps to 4.83% from 5.17% in June. Inflation expectations have fallen below 5% after 17 months.”

According to government data released on Monday, India’s retail inflation increased to 7 per cent in August from 6.71 percent the previous month as a result of an increase in food costs.

The Reserve Bank of India’s tolerance band for retail inflation has been exceeded for eight consecutive months. The RBI is in danger of failing to achieve its inflation mission as the headline inflation rate has exceeded 6 per cent for eight consecutive months.

The RBI is required to maintain inflation between 2 per cent and 6 per cent. If the average inflation rate exceeds the 2–6 per cent range for three consecutive quarters, the RBI is regarded to have failed in its mission.

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