Retail Inflation at 6-year Low; WPI Turns Negative
India's key inflation gauge dropped to pre-pandemic lows on the back of a sharp decline in food inflation, triggering hopes of another rate cut by the Reserve Bank of India (RBI). Retail inflation in June based on the Consumer Price Index (CPI) dropped to 2.1%, the lowest in more than six years and just shy of the lower end of the central bank's 2-6% target range, official data released Monday showed.The RBI is mandated to target 4% retail inflation within the range. This is the fifth consecutive month that CPI inflation has printed below 4%. Retail inflation is at its lowest since January 2019, when it was 1.97%.The Wholesale Price Index (WPI) slipped into the deflation zone, hitting a 20-month low of -0.1% in June against 0.4% in May. The drop in the inflation rate was driven by a decline in food and fuel prices and a moderation in manufactured goods. ICRA chief economist Aditi Nayar said a 25 bps cut in August cannot be ruled out, continuing the cuts seen this year in June.Others didn't concur.'This number will not have any impact on the policy decision and hence a status quo can be expected,' said Madan Sabnavis, chief economist at Bank of Baroda.CareEdge chief economist Rajani Sinha said, 'The Reserve Bank of India has already front-loaded the rate cuts anticipating moderation in inflation, hence we do not expect further rate cuts, unless economic growth weakens materially.'A basis point is 0.01 percentage point.In its last policy announcement on June 5, the RBI cut the repo rate by more than expected 50 basis points, delivering a cumulative one percentage point reduction in calendar 2025 to boost demand. It also lowered the cash reserve ratio (CRR) by 100 bps, but shifted its stance to neutral from accommodative, suggesting a pause on monetary action.Nayar reasons that a slowing economy may bring an August rate cut by the central bank's monetary policy committee (MPC).'Given the weakness in a majority of the available high-frequency indicators, we foresee the gross domestic product (GDP) growth to print at 6.0-6.5% in Q1FY26, the data of which will only be available at end-August i.e. after the MPC's meeting,' said Nayar.The Centre will release GDP data for the June quarter in August. The MPC meets August 4-6.Low inflation is expected to help prop up demand.'The declining inflation is expected to provide a significant boost to the real wages of the households in FY26,' said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra). Jasrai said one more 25 basis point cut could still occur this fiscal year unless there are surprises from global developments or growth hits a slump.The average retail inflation rate was at a 25-quarter low of 2.7% in the June quarter, lower than the central bank's forecast of 2.9%, while average wholesale inflation dropped to a five-quarter low of 0.4%.Food inflation, a major component of CPI, slipped to deflation, coming in at -1.1%, the lowest in over six years.Core inflation, which excludes volatile food and fuel prices and signals demand pressures, rose to 4.4% in June, the highest since September 2023, largely due to an uptick in jewellery.Food inflation dropped due to a favourable base effect and a fall in prices of vegetables (-19%), pulses (-11.8%), and meat & fish (-1.6%). Cereal inflation hit a 41-month low of 3.7%.Out of 22 major states and union territories, 10 recorded inflation above the national average, with Kerala leading at 6.7%, followed by Punjab (4.7%), Jammu and Kashmir (4.4%), Uttarakhand (3.4%), and Haryana (3.1%).
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indian Express
7 minutes ago
- Indian Express
Nagaraju asks banks to raise capital, lend more
Banks need to further step up lending to meet the economy's demanding growth requirements, and should not hesitate to explore multiple avenues to raise the capital needed, financial services secretary M Nagaraju said on Friday. He assured all necessary policy support to the lenders, and hinted at relaxations in the foreign direct investment (FDI) rules. Speaking to Financial Express Deputy Managing Editor Shobhana Subramanian at the FE Modern BFSI Summit here, Nagaraju said: 'We also actually need to look at reviewing the current FDI rules in the banking sector to enable Indian banks to raise more capital…more patient capital.' The FDI in private banks is currently capped at 74 per cent, whereas the limit is 20 per cent for public sector banks (PSBs); any single entity cannot hold more than 15 per cent in any Indian bank unless exemption is granted by the Reserve Bank of India (RBI). 'If foreign capital comes at a cheaper rate, I think we should welcome (it). Currently, it is 15 per cent (single entity cap), and if it can be more, the banks will be able to expand credit, that's the goal,' the DFS secretary said. He stressed the need to have sustained high growth in credit flows to the needy sectors of the economy, including MSMEs. As of June 27, 2025, credit offtake was up 9.5 per cent on year, lagging deposit growth of 10.1 per cent. Nagaraju's comments come at a time when the State Bank of India (SBI) has raised Rs 25,000 crore through qualified institutional placements (QIPs) to bolster its capital base, and other state-run banks among themselves are set to raise Rs 20,000 crore via this route in the current financial year. 'Credit growth is a little slower in this quarter, but we are expecting that it will pick up… we also want the banks to lend,' the official said. With large corporations flush with cash, credit growth is now largely directed at MSMEs, the secretary said. In March 2025, the aggregate capital adequacy ratio (CAR) of 46 major banks reached a record high of 17.2 per cent, but the credit flows haven't been exactly keeping pace with this, or the investment demand to the assisted via bank capital. With banks required to play a pivotal role in driving India's ambition of becoming a $30-trillion economy by 2047, he said bank credit to the private non-financial sector should reach around 130 per cent of the gross domestic product (GDP) from 56 per cent now. According to Nagaraju, banks and financial institutions need to explore and expand various avenues of raising capital, including conventional equity markets, issuance of Basel III-compliant AT1 bonds and tier 2 instruments. They could also explore innovative methods like tapping global financial hubs, green bonds, sustainability-linked loans and also foreign debt markets to fund domestic credit expansion. He also urged large incumbent banks to focus on capital conservation by reducing operational costs with the use of technology. Nagaraju said banks ought to reimagine deposit mobilisation and increase leverage and productivity, deepen digital and data capabilities, and build future-readiness in terms of ESG-resilience and governance. By advancing these strategic themes, Indian banks could actually transform themselves into stronger institutions, he said. 'Therefore, access to capital from all sources needs to be looked at and worked upon by all of us. We need multiple globally competitive large banks facilitating access to global funds, best talent and technical expertise,' he said. Currently, only two Indian banks — SBI and HDFC — are in the top 100 global banks by total assets, which is not enough, he said, drawing comparison to lenders in China and the US. On further consolidation of PSBs, he said the previous mergers have yielded good results. 'We would see that wherever the synergies are, we can always look at them (more PSB mergers).' Banks anchor inclusive growth by bringing the unbanked under formal financial systems, enabling millions through schemes like Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, and more, he added.
Indian Express
7 minutes ago
- Indian Express
RBI Governor Sanjay Malhotra: US Fed chair doing good job, central bank independence important
AMID THE ongoing feud between US President Donald Trump and Federal Reserve Chairman Jerome Powell, Reserve Bank of India Governor Sanjay Malhotra on Friday appreciated the Fed chair for doing a 'good job'. 'I don't think he needs advice. I think he is doing a very good job. Maintaining the independence of the central bank is very important. I think he has done a commendable job,' Malhotra said on Friday, when asked what advice he would give Powell to deal with Trump. He was responding to a question asked by Anant Goenka, Executive Director, The Indian Express Group, at the Financial Express Modern BFSI Summit in Mumbai. 'I may mention that we were there in the IFMC about a couple of months ago in Washington, where the finance ministers and central bankers of the top 30-40 countries were present. And every governor and finance minister gets a chance to speak on the economy and what's required to be done. There were some 40-50 speakers. Jerome Powell was also there and he spoke about what he was doing about central bank independence, and out of everyone, he was the only one who got a roaring applause. No one else,' Malhotra recalled. Since taking over as the US President in January this year, Trump has targeted Powell repeatedly. He has criticised Powell for not cutting interest rates, and called him a 'numbskull'. Last month, Trump said he was considering the possibility of replacing Powell and had three-four potential candidates. On Thursday, Trump and Powell sparred over the renovation costs of the Federal Reserve's headquarters in Washington. Earlier in the day, at a fireside chat with Shyamal Majumdar, Editor, Financial Express, the RBI Governor said the war against inflation is an ongoing process and the central bank would continue to keep an eye on it. He said the RBI was soon going to come out with a discussion paper on flexible inflation targeting (FIT) framework, which is due for a review. Headline inflation, as measured by y-o-y changes in the all-India consumer price index (CPI), declined to 2.1 per cent in June 2025, the lowest since January 2019, compared to 2.8 per cent in May. Retail inflation remained below the 4 per cent target for the fifth consecutive month in June. 'It's (inflation below 4 per cent) not a permanent victory. It is a victory, it's a battle won, but the war against inflation continues. We never let our eyes off inflation. Our primary objective is to maintain price stability,' Malhotra said when asked about his major worry now that the RBI seems to have won the war against inflation. Malhotra said the RBI's other objective was growth, which is also a prerequisite for a stable economy. 'History tells us (that in) various economies, wherever there has been very high volatility and inflation, growth has suffered,' he said. To a question on what the RBI's Monetary Policy Committee (MPC) philosophy would be when it is certain that inflation is going to be below 3.7 per cent in FY2026, he said the rate-setting panel would look at the data that comes in and take a final call. 'Even though 3.7 per cent is the average (inflation) for this year (FY26), the Q4 (estimate of 4.4 per cent) may be revised downwards, given the fact that the numbers that are coming in are lower than what we had projected even for Q1. We will see how it (Q4 inflation print) gets revised. So, monetary policy, being data-driven, will be guided by the revised numbers, if any,' he said. He reiterated that the change in monetary policy stance to 'neutral' in the June policy gives the MPC the flexibility to move interest rates in either direction, or even to go for a pause. His statement comes a few days ahead of the next monetary policy meeting, scheduled on August 4-6. Asked if a rate cut in the near future was not ruled out, Malhotra said it was for the monetary policy committee to decide. He, however, highlighted that a neutral stance does not mean a reversal of the easing policy, a rate cut can still be there. 'We have the flexibility to move up, down, or pause. Yes, it does mean that the bar for further easing is higher than it would have been if it was accommodative, which was a clear signal for further easing,' he said. Malhotra described the flexible inflation targeting (FIT) framework as a success, because it has resulted in a moderation in inflation to an average of 4.9 per cent since the regime's introduction in 2016. Under this framework, the RBI has been mandated by the government to maintain CPI at 4 per cent with a band of +/-2 per cent. He said the framework is due for a review, and the RBI will soon be coming out with a discussion paper on it. The government, in consultation with the RBI, revisits the inflation target under the FIT regime every five years. 'We will invite suggestions from all the stakeholders, and will give our comments to the government. The final call has to be taken by the government as to what the particular target or the benchmark should be for the flexible inflation targeting,' he said. On tepid growth in bank credit and private investments, Malhotra said the monetary transmission is happening and this will support growth in the near term. The MPC has cut the repo rate — the key policy rate — by 100 bps between February-June 2025. The repo rate was reduced by 25 bps each in February and April monetary policy meetings, and by 50 bps in the June policy. 'Within two months of our 50 basis point cut (25 bps each in February and April policy), the whole of the monetary policy transmission has happened. So all these things will actually help further in improving credit and improving growth,' he said. Like for corporates, Malhotra also expressed reservations about allowing non-banking financial companies into the banking space. He said the eligibility criteria for a company or for an NBFC is not very different. 'If a large industrial house is doing financial activities and real economy activities within the same group, there is an inherent conflict of interest, with the group actually dealing with the money of the depositors. So those concerns are valid, and they continue to remain,' he said, when asked if the RBI was open to allowing NBFCs to enter the banking space. He noted that there was no proposal at present to allow corporates, whether through NBFCs or as an individual company, to get a banking licence. Malhotra welcomed the India-United Kingdom (UK) bilateral free trade agreement (FTA), saying the deal would give a boost to the domestic manufacturing and services sectors. 'Hopefully it (India-UK free trade agreement) should help us. I think that is the way going forward now, because unfortunately multilateralism seems to have taken a back seat. So I think in that sense, it's good that we already have one FTA in place,' Malhotra said. He also emphasised the need for more such deals and said the agreement with the US is in advanced stages.
NDTV
3 hours ago
- NDTV
IRCTC Got Over 6,000 Complaints On Poor Food Quality In 2024-25: Minister
New Delhi: In 2024-25, 6,645 complaints related to poor quality of food were reported by passengers, out of which in 1,341 cases fines were imposed on the food suppliers, Railway Minister Ashwini Vaishnaw said in a written reply in the Rajya Sabha on Friday. Of the total, in 2,995 cases warnings were issued, in 1,547 cases suitable advisories were given and other measures were taken in the remaining 762 cases, Mr Vaishnaw said in the reply. CPI(M) MP John Brittas raised the issues of food quality in trains and transparency in the award of contracts to companies. When asked to provide details regarding instances of seizure of unhygienic food items from the railway caterers as well as complaints filed by passengers regarding the quality and safety of food served on trains in the last five years, the Railway Minister presented the data in a tabular form. Mr Vaishnaw said, "Prompt and appropriate punitive action, including imposition of fines, disciplinary action, counselling, warning etc., is taken in case any instance of adulterated/unhygienic food or passenger complaint is reported." According to the data, in 2023-24, 2022-23, and 2021-22, the number of complaints received from passengers was 7,026, 4,421, and 1,082, respectively. Mr Brittas asked "whether Indian Railways Catering and Tourism Corporation (IRCTC) awarded contracts across multiple railway routes, including Vande Bharat and other long-distance services, to a corporate group using multiple affiliate entities." In his reply, the Union minister said that the IRCTC regularly floats tenders to select service providers for the provision of onboard catering services in trains, including Vande Bharat and other long-distance trains. "These tenders are awarded through a transparent process to the highest bidders as per the terms and conditions stipulated in the tender documents. The details of Letters of Award (LOA), issued to multiple service providers, are published on the website of IRCTC. At present, contracts of clusters of trains have been awarded by IRCTC to 20 entities," Mr Vaishnaw said. He provided various measures taken to maintain food quality, such as the supply of meals from designated Base Kitchens, commissioning of modern Base Kitchens at identified locations, Installation of CCTV Cameras in Base Kitchens, shortlisting and use of popular and branded raw materials, deployment of Food Safety Supervisors at Base Kitchens to monitor food safety and hygienic practices among others.
