Though the inflation has moderated in July, from 7.25 per cent in June, it remains much above the 5-6 per cent comfort level of the Reserve Bank. While the drop in the inflation number has come as a surprise,common households continue to pay high prices for edible items.
Inflation, as measured by the Wholesale Price Index (WPI), was 9.36 per cent in July last year.
While inflation for vegetables has eased in July as compared to June, the wholesale prices are still high above the comfort level. The annual rate of price rise was 24 per cent in July, though it was 49 per cent in the June.
Food inflation, which accounts for nearly 15 per cent in the overall inflation basket, was at 10.06 per cent in July, easing a little from June's 10.81 per cent, as per official data released today.
Manufacturing or core inflation rose to 5.58 per cent in July from 5 per cent in June, on the back of high prices of cotton textiles, paper and paper products, cement and lime.
Higher inflation in this category would restrict the scope of RBI to go in for an interest rate cut even as economy is showing signs of slowdown, experts said.
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RBI Governor D Subbarao had yesterday said that inflation over seven per cent is above the tolerance level and stressed on the need for containing price pressure.
Commenting on inflation number, Planning Commission Deputy Chairman Montek Singh Ahluwalia said, "the dip is welcome but inflation is still above the comfort level. 5 to 6 per cent is tolerable level of inflation".
Experts, however, said that the dip in inflation was unexpected and that deficient-monsoon and supply constraints would keep the number high in the coming months.