India’s Headline Inflation eased to 6.87 Percent in July 2012

India’s annual headline inflation for the month of July 2012 eased to its three-year low of 6.87 percent in July 2012 from 7.25 percent in June 2012 and 9.63 percent in July 2011.  The monthly inflation figure was released by the Union Ministry of Commerce and Industry on 14 August 2012. Despite the inflation appears to be on a downward trajectory, RBI is unlikely to take a call on easing the key policy rates as inflation still remain way above its comfort level of 5-6 percent.

Owing to the meager drop in vegetables price food inflation which has a share of about 15 per cent in the Wholesale Price Index basket, fell marginally to 10.06 per cent in July 2012 from 10.81 per cent in the previous month.

Inflation in manufacturing sector or core inflation rose to 5.58 percent in July 2012 as compared to 5 percent in June 2012. Rise in core inflation was mainly attributed to higher prices of cotton textiles, paper and paper products, cement and lime.

The Apex Bank is scheduled to undertake its mid-quarter monetary policy review on 17 September 2012. Notwithstanding the dipping trend in inflation, there are remotest possiblities of RBI Governor taking any call on easing policy rates as he has reiterated that inflation is still above the RBI's comfort mark of 5-6 percent. There have been vociferous demands from various quarters to relieve the tight monetary policy stance, which is apparently hurting the growth of the economy. RBI had left the policy rates unchanged in its quartely monetary policy review in July 2012.