Retail inflation eased a tad to 9.86 per cent in July year-on-year from 9.93 per cent in June but the downtrend for the second straight month afforded no relief to consumers as vegetable prices continued to rule at higher levels.

Even as the consumer price spiral has been on a declining path from 10.36 per cent in May to 9.93 per cent in June — from the provisional 10.02 per cent following final revision — the CPI (consumer price index) data released here on Tuesday by the Central Statistical Organisation (CSO) show that prices of vegetables in July this year continued to spike, and remained 27.33 per cent higher than that in the same month of 2011.

Edible oils followed next with their prices higher by 17.37 per cent while pulses and their products also ruled 12.49 per cent dearer during the month as compared to their prices in July last year. Keeping the price spiral up were the protein-rich edibles such as eggs, fish and meat which were costlier by 11.11 per cent.

Alongside, while non-alcoholic beverages turned dearer by 9.26 per cent, cereals and their derivatives, among other items, also witnessed a 6.45 per cent spurt in prices as compared to July last year.

With this, although WPI (wholesale price index)-based headline inflation also has been on a decline and stood pegged lower at 6.87 per cent in July against 7.25 per cent in the previous month, a fall in food prices is not expected any time soon and both CPI and WPI inflation levels are likely to inch up from hereon.

In fact, with a deficient monsoon in play and prospects of a drought-like situation in a large number of States — Haryana, Punjab, Rajasthan, Gujarat, Maharashtra and Karnataka — the chances of a fresh spurt in food inflation is all the more real.

Moreover, the fact remains that with fuel prices kept suppressed at fiscally unsustainable levels, a pass-through in fuel prices, whenever effected, will add to inflationary pressures.

In the event, it is unlikely that the Reserve Bank of India (RBI) will make any attempt to tinker with its key policy rates during the next credit policy review on September 17 as the headline inflation level remains much above the comfort zone of 5-6 per cent.

According to HDFC Bank economist Jyotinder Kaur, prices of food commodities are likely to go up further as the drought impact has to be factored in.

“The RBI will keep its key interest rates on hold in its coming policy action, unless there is some credible action from the government,” she said.

Meanwhile, CPI-based inflation for rural and urban areas was 9.76 per cent and 10.10 per cent, respectively, in July as compared to the revised levels of 9.65 per cent and 10.44 per cent in the previous month.

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