July CPI rises to two-year high of 6.07 pct

Consumer Price Index (CPI) inflation for the month of July rose to a two-year high of 6.07 percent maintaining the Reserve Bank of India's (RBI) near-term target of rise in prices of food in the month of July.

Also, food price inflation rose to 8.35 percent versus 7.79 percent in May.

As per the government data, the consumer prices have risen faster-than-expected at a pace of 6.07 percent last month from a year ago, up from June's 5.77 percent annual gain.

Both rural and urban inflation rose to 6.66 percent and 5.39 percent from 6.29 percent and 5.26 percent respectively.

Vegetable inflation declined marginally to 14.06 percent versus 14.74 percent in June, but pulses inflation rose to 27.53 percent versus 26.86 percent.

Also, housing inflation dipped to 5.42 percent versus 5.46 percent, and clothing, footwear inflation rose to 5.23 percent versus 5.01 percent. Fuel, light inflation came in at 2.75 percent versus 2.92 percent in June.

In the last monetary policy review, RBI Governor Raghuram Rajan had indicated upside risks to inflation. He had anticipated increase in food prices that have pushed up the projected trajectory of inflation over the rest of the year.

"Prices of pulses and cereals are rising and services inflation remains somewhat sticky," Rajan had said during the third monetary policy review.

Adding on the implementation of the recommendations of the seventh central pay commission on allowances, Rajan cautioned that inflation projections as given in the June bi-monthly statement may cross the trajectory towards five percent by March 2017 with risks tilted to the upside.