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Retail inflation is high due to food prices and unfavorable base effect, says Fin Min

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  • The Ministry of Finance said CPI-based inflation recorded “a moderate increase.”
  • According to the ministry, inflation can be attributed to both a negative base effect and an increase in food and fuel prices.
  • Both are the transient components of CPI inflation, the ministry said.

As retail inflation rose from 6.71 percent in July to 7 percent in August, the Treasury Department said late Monday that inflation based on the consumer price index (CPI) “recorded a moderate increase”, adding that this could be attributed to “both a negative base effect and a rise in food and fuel prices – the temporary components of CPI inflation”.

It added via a series of tweets that core inflation, calculated by excluding the temporary components of CPI such as “food and drink” and “fuel and light”, registered at 5.9 percent in August and thus below the tolerance limit. of 6 percent remained. set by RBI for the fourth consecutive month.

“The prices of key inputs such as iron ore and steel have sobered up in global markets. This, coupled with measures taken by the government to rationalize input tariff structures to increase domestic supply, has helped to keep cost inflation in consumer goods under control,” the ministry said.

Despite volatile monsoons and negative seasonal influences in vegetable prices, food inflation in August was still lower than the April peak of the current year.

With global inflationary pressures, inflation expectations remain anchored in India with stable core inflation, the ministry said optimistically.

“IIM-Ahmedabad’s One-year Ahead Business Inflation Expectations Survey in July fell 34 basis points to 4.83 percent from 5.17 percent in June. Inflation expectations have fallen below 5 percent after 17 months,” said another. tweet.

“In order to lower the prices of edible oils and legumes, tariffs on imported items have been rationalized periodically and inventory limits for edible oils have been enforced to prevent hoarding,” the ministry said, listing the measures taken to control prices. of essential raw materials.

Inflation in “oils and fats” and “legumes and products” has decreased to 5.62 percent and 2.52 percent respectively, the Ministry of Finance said.

“The government has banned the export of food products such as wheat flour/atta, rice, maida, etc. in order to stabilize domestic stocks and curb price increases. The impact of these measures is expected to be felt even more strongly in the coming weeks and months. ,” it said.

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