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Business Times
4 days ago
- Business
- Business Times
India's inflation at eight-year low gives RBI scope to cut rates
[MUMBAI] India's inflation rate slid below the central bank's target band for the first time in eight years, giving policymakers more scope to cut interest rates in the coming months if economic growth takes a hit from surging US tariffs. The consumer price index rose 1.55 per cent from a year earlier last month, according to data released on Tuesday (Aug 12) by the Statistics Ministry, higher than the 1.40 per cent increase forecast by economists in a Bloomberg survey. Inflation slowed to 2.10 per cent in June and had dipped to 1.46 per cent in June 2017. India's bonds maintained losses with the yield on the 10-year government paper up 4 basis points to 6.48 per cent. The Reserve Bank of India (RBI) aims to keep inflation within 2 to 6 per cent. The RBI last week kept its repurchase rate unchanged and said it will closely watch the impact of US President Donald Trump's tariffs on Asia's third-largest economy. Citigroup estimates a hit of as much as 0.8 percentage point to annual growth if the levies go up by 50 per cent. 'Given the inflation outlook, the RBI has room to cut rates further by 25-50 basis points in case there is evidence that growth is slowing down significantly due to tariff shocks,' said Sakshi Gupta, an economist with HDFC Bank, in a note to clients. 'For now, we do not expect further rate cuts by the RBI.' A continued decline in food prices drove the consumer price index lower. Above-normal monsoon rains, that irrigate more than half of the country's farmlands, helped improved agriculture output. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Food prices, which make up about half of the CPI basket, fell 1.76 per cent in July, the fastest decline since January 2019. Vegetable prices contracted 20.7 per cent from a year ago in July, compared to a decline of 18.92 per cent the previous month. Core inflation, which strips volatile food and fuel prices from the headline, softened to 4.22 per cent from 4.53 per cent in June, according to calculations from Bloomberg Economics. The central bank had lowered its inflation forecast for the fiscal year that started in April to 3.1 per cent from 3.7 per cent in its last monetary policy meeting, but warned that the consumer price index may edge above 4 per cent during the January to March period as the base effect wears off. Both inflation and growth are likely to undershoot the RBI's forecast, suggesting 'scope for further rate cuts' of 25-50 basis points, said Teresa John, an economist with Nirmal Bang Equities. BLOOMBERG
Bloomberg
5 days ago
- Business
- Bloomberg
India's Inflation Eases to 8-Year Low as Food Prices Fall
India's inflation eased to the lowest in eight years last month, though the central bank forecasts that the price gains may inch up in the coming months. The consumer price index rose 1.55% from a year earlier in July, according to data released Tuesday by the Statistics Ministry. That's higher than the 1.40% increase forecast by economists in a Bloomberg survey. Inflation slowed to 2.10% in June and had dipped to 1.46% in June 2017.
Indian Express
23-07-2025
- Business
- Indian Express
India's bottom 50% of consumers face same GST burden as mid-30%, finds study
The bottom half of India's consumers face the same Goods and Services Tax (GST) burden as the middle 30 per cent, according to a new study that analyses the impact of the indirect tax regime using the Statistics Ministry's Household Consumption Expenditure Survey (HCES) for 2022-23. The study found that the bottom 50 per cent of Indian consumers living in rural areas bore 31 per cent of the GST burden — the same as the middle 30 per cent of rural consumers. The figures were similar for urban areas: the bottom 50 per cent faced 29 per cent of the burden, while the middle 30 per cent bore 30 per cent. In both cases, the top 20 per cent of consumers had to bear the bulk of the tax burden: 37 per cent in rural areas and 41 per cent in urban areas. As per the 2022-23 HCES, the bottom 5 per cent of consumers in rural areas had an average Monthly Per Capita Expenditure (MPCE) of Rs 1,373, while those in urban areas spent Rs 2,001. Among the top 5 per cent, rural consumers had an MPCE of Rs 10,501 while urban consumers spent Rs 20,824, according to the survey. The tax burden is the share of the GST estimated to have been paid by households. The findings of the paper, titled 'Distributional Impact of Indian GST based on the NSSO's Household Consumption Expenditure Survey of 2022-23' authored by Sacchidananda Mukherjee, a professor at the New Delhi-based think-tank National Institute of Public Finance and Policy (NIPFP), are in contrast with a 2023 Oxfam report which said the poorest 50 per cent of Indians contribute nearly two-thirds of total GST collections, with the richest 10 per cent contribute only 3-4 per cent. On the whole, Mukherjee's analysis, released earlier this month, suggested the GST had positive redistributive effects as post-tax consumption inequality declined and is 'moderately progressive'. A tax system is said to be progressive when higher-income individuals pay a higher rate of tax. Mukherjee told The Indian Express that recent literature shows 'most countries following multiple tax rates in GST or VAT system — the European Union follows a multiple tax rate system, for instance — are getting a similar kind of result: progressive, but moderately so.' The paper's findings come amid talk of a major overhaul of the GST rate structure, with The Indian Express reporting earlier this month that Home Minister Amit Shah will begin talks with stakeholders to build consensus and resolve contentious issues. One of the proposals on the table is the removal of the 12 per cent GST rate by shifting some items to the 5 per cent slab and others to the 18 per cent list. In his paper, Mukherjee allocated 390 items from the 2022-23 HCES — after excluding seven items that don't attract GST, such as second-hand books — into the various GST buckets. However, assigning a specific tax rate to each item was difficult as rates also depend on marketing or physical features (packaged or labelled), as well as the presence of certain specific rates — for instance, a 6 per cent rate is charged on brick kilns under composition scheme, without input tax credit. These are in addition to the major GST rates of nil, 5 per cent, 12 per cent, 18 per cent, and 28 per cent. As such, the 390 items were distributed across nine broad buckets: exempt, exempt to 5 per cent, 5 per cent, 5-12 per cent, 12 per cent, 12-18 per cent, 18 per cent, 28 per cent, and more than 28 per cent. Items that are not under the GST, such as alcohol and fuel, were part of a separate 'Out of GST' category. This categorisation led to 154 of the 390 items falling in the 'exempt' and 'exempt to 5 per cent' buckets, with 105 of them being food items, while most items attracting GST rates of 12 per cent or more were non-food. In spending terms, 45 per cent of average MPCE was on items in the 'exempt' and 'exempt to 5 per cent' buckets in both rural and urban areas. Meanwhile, 9 per cent of rural MPCE and 10 per cent of urban MPCE was on items in the 'Out of GST' category. After making adjustments to the MPCE given in the 2022-23 HCES for each fractile class — bottom 5 per cent, bottom 5-10 per cent, and so on until the top 5 per cent — the paper found that the bottom 5 per cent of consumers in rural areas spent more than 47 per cent of their MPCE on items either exempt from GST or attracting a rate of up to 5 per cent. This share fell before rising for the top two categories of consumers, namely those in the 90-95 per cent and 95-100 per cent fractiles, suggesting increased consumption of more expensive and processed food items at higher consumption levels. The paper warned that reducing the number of items exempt from GST may increase the tax burden for least-consuming people in rural areas. Careful redesign needed Mukherjee also warned that increasing the tax rate on items in the 5-12 per cent bucket may increase the tax burden on those in lower consumption classes in both rural and urban areas since the share of MPCE spent on these items was higher for consumers in lower fractile classes. Meanwhile, changes in expenditure share of items in the 12-18 per cent bucket across consumption classes was more complex, with the paper saying that increasing the GST rates on these items 'may not be regressive if designed carefully'. The issue of rationalisation of GST rates has been pending for several years, with a Group of Ministers for the same set up way back in September 2021. However, talk of the need to make changes to GST rates has risen recently due to the subdued performance of urban consumption in particular. Earlier this month, Confederation of Indian Industry President Rajiv Memani called for a reduction in tax rates on certain goods, especially those that are purchased by people in lower-income categories. This, Memani argued, would hopefully boost consumption.
Indian Express
15-07-2025
- Business
- Indian Express
India's unemployment rate remains steady in June at 5.6%, but LFPR slips as less people looked for jobs
Seasonal factors again weighed on India's labour market in June as the unemployment rate remained unchanged at 5.6 per cent, although the Labour Force Participation Rate (LFPR) declined to 54.2 per cent in June from 54.8 per cent in May, suggesting fewer people looked for jobs last month. According to the Statistics Ministry's latest monthly Periodic Labour Force Survey (PLFS) report, released on Tuesday, while the unemployment rate (UR) for Indians aged 15 years and above was flat month-on-month in June at 5.6 per cent, there was a marginal decline in UR to 5.6 per cent from 5.8 per cent in May for females, while that for males remained at 5.6 per cent. The monthly jobs data is based on the Current Weekly Status (CWS) approach. Under this approach, the activity status of a person is measured for the seven days preceding the date of survey. Although the headline unemployment number was steady, the figures for rural and urban areas moved in opposite directions. While rural unemployment declined by 20 basis points (bps) to 4.9 per cent in June, urban unemployment rose by 20 bps to 7.1 per cent for those aged 15 years and above. According to the Ministry of Statistics and Programme Implementation (MoSPI), the decrease in the unemployment rate among rural males and females in June was due to an increase in the share of own-account workers, with seasonal factors 'prompting individuals to engage in small-scale or self-initiated activities' such as petty trade, repair work, or services. Meanwhile, an increase in urban unemployment was particularly pronounced among the youth, with the jobless rate increasing to 18.8 per cent from 17.9 per cent in May for those in the 15-29 years age bracket. Female youth unemployment rose by 140 bps to 25.8 per cent, while for males the increase was 80 bps to 16.6 per cent. At an all-India level, youth unemployment rose by 30 bps to 15.3 per cent in June. Summer pangs While the all-India unemployment rate was steady at 5.6 per cent after posting a 50 bps increase in May, the LFPR declined for the second month in a row for most segments of the population in rural and urban areas. The biggest fall in LFPR was seen among young females in rural areas, for whom the ratio decreased by 240 bps to 20.5 per cent. The fall among males in rural areas in the 15-29 years age bracket was approximately half that, at 110 bps, as their LFPR declined to 62.0 per cent. The decline seen in the Worker Population Ratio (WPR) was similar: at an all-India level, the WPR declined by 50 bps to 51.2 per cent. The LFPR is the fraction of the population that is seeking or available for work, while the WPR is the percentage of employed persons in the population. According to MoSPI, the fall in LFPR and WPR in June was 'largely influenced by seasonal agricultural patterns, intense summer heat limiting outdoor physical work, and a shift of some unpaid helpers, particularly from higher-income rural households, towards domestic chores'. The June PLFS report is the third-ever monthly labour market data from the statistics ministry. Back in June, while detailing data for May, MoSPI had cautioned that a rise in the unemployment rate did not necessarily reflect 'secular trends' as changes were to be expected in the monthly data on account of increased frequency of the survey and seasonal, academic, and labour market factors. A total of 3.8 lakh persons were surveyed by MoSPI in June, roughly the same as in April and May. As part of the revamped survey design for the PLFS adopted in January, a rotational panel sampling design is being used. Under this, each selected household is visited four times in four consecutive months. This ensures that three-fourths of first-stage sampling units, or FSUs, are matched between two consecutive months. Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy. ... Read More
Bloomberg
15-07-2025
- Business
- Bloomberg
India's Jobless Rate Stood at 5.6% in June, Government Says
India's jobless rate remained steady at 5.6% for those aged 15 years and above in June, data from the Statistics Ministry showed Tuesday. The overall unemployment rate in urban areas inched up to 7.1% from 6.9% in May, while it was 4.9% in rural areas, the government said. Youth unemployment for those aged between 15-29 years was at 15.3% in June, compared to 15% the previous month, according to the survey.
