Upside risks to inflation prevails; July CPI to be in 5.7-5.9%

Upside risks to price rise still prevails, largely owing to increasing international commodity prices and implementation of the seventh pay commission awards, while CPI inflation is likely to be in the range of 5. 7-5.9 per cent in July, says a report.
"Structural issues in the inflation dynamics continue to prevail as rural CPI inflation on average remains above the urban CPI inflation," Dun & Bradstreet India Lead Economist Arun Singh said.
According to D&B, the progress of monsoon in the subsequent two months and its spread will determine the course for cultivation of crops and their availability and thus food inflation in the coming fiscal.

"While news about development of La Nina phenomenon brings some cheer, food inflation at 23-month high raises concern about its ripple effect on the larger inflation trajectory," Singh said.
The RBI, on the other hand, is likely to maintain status quo in the monetary policy meeting scheduled in August and most probably defer any decision to change the repo rates till the impact of monsoon over the course for cultivation of crops and their availability has been realised completely, he added.
In the June policy review meet, RBI Governor Raghuram Rajan kept interest rates intact, citing rising inflationary pressure, but hinted at a reduction later this year if good monsoon helps ease inflation.

D&B expects the WPI inflation to be in the range of 1.8-2 per cent and CPI inflation to be in the range of 5.7-5.9 per cent during July this year.

The wholesale inflation accelerated for the third straight month in June hitting 1.62 per cent on costlier food and manufactured items.
The hardening of the WPI index followed an uptick in retail inflation, which hit a 22-month high of 5.77 per cent in June.
Singh further noted that "the government's continued commitment to reforms to steer the economy has uplifted optimism amongst the corporate sector.
The passage of the GST Bill in Parliament, which will establish the regime of a common market in India, will further boost the confidence amongst domestic and foreign business community about the prospect of India's high growth.