CPI inflation falls at 3.8% in July 2015

Driven by fall in food prices

The headline CPI inflation (combined) for July 2015, based on news series fell to an 8-month low to 3.78% (y-o-y), after rising to 5.40% in June 2015, reflecting a high base to an extent, but also much lower food inflation on a seasonally adjusted basis. The corresponding provisional inflation rate for rural area was 4.44% and urban area 2.94% in July 2015 as against 6.07% and 4.55% in June 2015. The core CPI inflation also lowered to 4% in July 2015 from 4.56% in June 2015.

The CPI inflation increased in July 2015 mainly driven by fall in inflation for the food group. The food and beverages group eased to 2.89% in July 2015 from 5.73% in June 2015, a fall of 284 bps this month. Inflation for clothing and footwear eased to 5.88%, while housing inflation eased to 4.44% in July 2015 and Fuel inflation softened slightly to 5.36%. Also, the inflation for miscellaneous items eased to 3.44%.

Consumer Food Price Indices (CFPI) for all India for rural, urban and combined, released separately saw a growth of 2.83%, 1.01% and 2.15%, respectively.

Within the Food, beverages category, while pulses and products recorded the maximum rise in prices as inflation increased to 22.88% in July 2015, others saw lower growth in inflation as spices increased at 9.09% and meat and fish at 7.02% and milk and products at 6.12% in July compared the rise in June 2015. There was a fall in prices of vegetables at 7.93% from a rise of 5.30% in June while fruits prices eased by 3.51% to 1.45%. The sugar and confectionery group prices fell by 12.30%.

CPI inflation in protein-rich items such as meat and fish increased to 7.02% (y-o-y) in July, and that of egg eased by 2.80%. The rate of price rise for cereals and products increased to 1.06% in July.

In the rural areas for July 2015, pulses and products (18.20%, y-o-y, also higher from June rise) showed the biggest upside followed by prepared meals, snacks, sweets etc. (9.02%, y-o-y but much lower from June rise), spices (8.83%) and meat and fish (7.51%), household goods and services eased (6.67%,), fuel and light (6.59%) transport & communication eased (0.80%). In rural areas, there were also disinflation observed for clothing and footwear (6.73%), health (6.53%), pan, tobacco and intoxicants showed uptick (9.75%) and education eased (6.49%).

In the urban areas for July 2015, pulses and products (32.18%, y-o-y) showed the biggest rise followed by spices (9.58%), vegetables declined (10.96%) and meat and fish (6.17%), Sugar and Confectionery declined (16.55%). In urban areas, there were also disinflation observed for food and beverages. (1.89%), Clothing and footwear (4.51%), fuel and light (3.32%), pan, tobacco & intoxicants (10%) and housing eased (4.44%).

For July 2015, the state wise biggest uptick, in the rural segment, was noted by Jammu & Kashmir (7.56%, y-o-y) followed by Karnataka (7.53% y-o-y) while lowest rise was recorded in West Bengal (2.33% y-o-y). For July 2015, the state wise biggest upside, in the urban segment, was noted by Tamil Nadu (4.85%, y-o-y), while the lowest rise was noted by Jharkhand (1.08% y-o-y).

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