Household items outlook for food inflation uncertain: RBI

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The price of retail goods in India can further rise in the upcoming months due to the damage in the supply chain of food and manufactured items’ which can amplify the sectoral price pressure stated by Reserve Bank of India. The monetary policies are formulated by keeping an eye on the price movements especially because of the chance of this situation to get translated into general inflation.

RBI is very vigilant and is constantly trying to improve the policies made in order to make the situation calmer. The annual report of RBI added that sensitive volatility in financial markets can also have an influence on inflation. The short-term outlook towards food inflation is what turned to be uncertain. The interest rates won’t be further decreased because it has already been declined after the pandemic surge. Retail price volatility gets affected in the economy very soon than any other sector. It is the most consumed goods from all levels of income strata.

The Consumer Price Index (CPI) inflation for the month of July rose up to 6.93 per cent, which is far from the imagination zone of Central bank. The overall increase in inflation is mainly because of the surging prices of food, which had a pace of 9.62 per cent in the month. Anyhow, the monetary policy review of RBI released earlier in the month stated that retail inflation is predicted to be in raised up levels during the second quarter but there is a chance for it to get eased in the second half of the current fiscal year.

Similarly, the inflation, which was high at 6.7 per cent in the Quarter 4 of FY20, is predictable to ease till Quarter 4 FY21. However, the survey conducted by Reserve Bank for the month of July specified that consumer confidence cut down to an all-time low, with a majority of respondents claiming pessimism relating to the general economic condition, inflation, employment and income.

In the meantime, despite being the most volatile item, seasonality in onion prices has deteriorated significantly over the years, partly reflecting development in cold storage facilities stated by RBI. As the coronavirus pandemic spread across the world, all product prices dipped. The shutdown of industries in China in February 2020 and later in Europe and the US, became a reason to a fall in demand for metals, easing their prices, the report further added.

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