Jharkhand: At 9.7%, Rajasthan records highest retail inflation in July

Official data released on Monday showed retail inflation, as measured by the consumer price index (CPI), had soared to a 15-month high of 7.4% in July, from 4.9% in June, largely driven by high vegetable and cereal prices, triggering worries over the price situation. Retail food index was at 11.5% during the month, up from 4.6% in June.

Stubborn retail inflation has emerged as a major policy headache in the lead up to the national elections next year and key state polls later in the year.
The data for states showed that out of 22 states, at least 14 had inflation in the range of 7% and above. Only Delhi, Assam, Jammu & Kashmir, and West Bengal had inflation rates below 6%.
The data also showed that rural inflation was higher at 7.6% while in urban areas, it was a shade lower at 7.2%. The data revealed Jharkhand to have the highest inflation rate for rural areas at 9.9%, followed by Telangana at 9.7%, Haryana at 9.5%, Tamil Nadu at 9.4%, and Rajasthan at 9.3%.
For urban areas, Uttarakhand topped the charts with a double-digit inflation rate at 10.5%, followed by Rajasthan at 10.4% and Odisha at 9.9%. The states with low inflation rates were Delhi with 3.7%, Assam with 3.9% and Jammu & Kashmir with 5%.
Experts said there could be multiple factors at play for the wide divergence of rates among states. “It could be that they are not major producers of vegetables (read: tomatoes) and spices, which contributed maximum to inflation. It could also be a low base effect or fast rising incomes pulling prices up,” said Ashok Gulati, distinguished professor at economic think tank ICRIER.
Economists said the central bank is likely to adopt a wait-and-watch stance. “On the food shock, RBI cannot do much to influence food supply management, but it adds pressure to stay vigilant on domestic dynamics,” said Madhavi Arora, economist at Emkay Global. “The recent pickup in policy supply response and the short-lived nature of vegetable inflation will imply that there is no change in RBI’s perspective on inflation and policy action. RBI will likely look through the transitory food price shock, while maintaining a cautious stance,” said Arora.