### Summary
Commerce Minister Piyush Goyal stated that despite short-term inflation hiccups, India has achieved nearly a decade of controlled inflation, offering the lowest rates in the country's history.
### Facts
- 💰 Headline retail inflation reached a 15-month high of 7.44% in July, surpassing economists' expectations of 6.6%.
- 🌽 Vegetable prices and sustained cost pressures in staples like cereals and pulses contributed to the high Consumer Price Index (CPI) for July.
- 🍅 The government implemented various measures to curb food price rise, including distribution of discounted tomatoes and conducting e-auctions for rice and wheat.
- 💼 Commerce Minister Goyal expressed confidence in India's economy, highlighting comfortable foreign exchange reserves and high growth.
- 🌍 With a young demographic dividend, India aims to become a $35-trillion economy and one of the world's top three economies in the next 30 years.
- 📈 India is currently the fastest-growing economy and is projected to achieve a GDP growth of 6.5% for the current financial year.
- 🇮🇳 The current government inherited challenges such as unpaid oil bond debt, high interest costs, and faltering exports from the previous government.
- 🌱 Goyal emphasized the importance of sustainable and inclusive growth alongside value creation for shareholders.
### Summary
India has witnessed a surge in inflation, reaching a 15-month high, primarily due to soaring prices in essential commodities. The government is implementing measures such as reducing retail prices, imposing export bans, and releasing wheat into the market to stabilize prices.
### Facts
- 🔺 Inflation in India has reached a 15-month high, driven by soaring prices in essential commodities such as vegetables, pulses, spices, and cereals.
- 🌍 Global uncertainties, including geopolitical tensions and crude oil price fluctuations, add to fears of food inflation picking up in India.
- 💰 The Reserve Bank of India (RBI) aims to maintain a tight grip on inflation and anchor it close to the 4 percent mid-point of the desired range.
- 💡 To mitigate the impact of rising prices, the Indian government has taken various steps, including reducing retail prices for specific stocks of tomatoes, imposing export bans on rice, and releasing wheat into the open market.
- 🇮🇳 Prime Minister Narendra Modi acknowledges the challenge of high inflation and vows to take more steps to minimize the burden of rising prices on citizens.
- 🌾 The government announces a 40 percent export duty on onions until the end of 2023 to control rising prices driven by supply-side challenges.
- 💸 The government is considering reallocating funds from various ministry budgets to address surging costs without jeopardizing the federal deficit target.
- 🛢️ Possible measures may include reducing taxes on domestic petrol sales and relaxing import tariffs on cooking oil and wheat.
- 📉 The central bank keeps borrowing costs unchanged, maintaining one of the highest rates in Asia, to address concerns about escalating prices.
- 🍚 India has also imposed a ban on non-basmati rice exports and implemented a 40 percent export duty on onions to maintain domestic supply and stabilize prices.
### Prime Minister Modi's Commitment
Prime Minister Modi emphasizes the need to take measures to ease the burden of rising prices on Indian citizens and pledges to continue efforts in this regard.
### The Indian Government's Multi-faceted Approach
India is adopting a multi-pronged approach to address inflation, with measures implemented by both the RBI and the government. These efforts demonstrate the nation's commitment to maintaining economic stability and minimizing the impact of inflation on the populace.
India is facing a rise in food prices due to uneven and scanty rain, prompting the government to take measures to boost supplies and ease inflationary pressures.
The spike in retail inflation has raised uncertainty for investors and savers, with expectations of interest rate cuts being pushed to the next fiscal year and the possibility of a rate hike. The Reserve Bank of India projects inflation to stay above 5% until the first quarter of 2024-25, and food price pressures are expected to persist. While inflation may impact stock market returns, gold and bank deposit rates are expected to remain steady.
Sky-high food inflation in India, caused by erratic monsoon rains, is leading to low sales and steep discounts in the fashion retail sector, raising concerns about consumer spending.
India's inflation must be brought within the central bank's tolerance band before the war on inflation can be relaxed, according to a member of the monetary policy committee, who also expects inflation to resume its downward trajectory in the next quarter.
The Indian government's efforts to control food prices, such as imposing taxes and export bans, may help contain inflation domestically but could lead to higher prices globally, particularly for rice, affecting countries that rely on food imports.
Pakistan's inflation rate remained above target in August at 27.4%, driven by reforms linked to an IMF loan that have fueled price pressures and declines in the rupee currency.
Philippine inflation unexpectedly quickened in August due to higher food and transport costs, putting pressure on the central bank to maintain its hawkish stance, and the government may consider reducing rice tariffs to help lower domestic costs.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
Despite a spike in gas prices, the rise in inflation appears to be easing gradually, with core prices exhibiting a slower increase in August compared to July, suggesting that price pressures are being brought under control.
US wholesale prices increased at a faster pace in August, indicating that inflation remains persistent despite interest rate hikes by the Federal Reserve.
August inflation rose to 3.7%, the highest month-to-month increase since June 2022, driven by rising gas prices, which accounted for over half of the rise, while prices for shelter and food remained elevated; however, the Federal Reserve's reaction to the data is uncertain as there are signs of prices moderating but also concerns over inflation remaining too high.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
Japan's core inflation remained steady in August, staying above the central bank's 2% target for the 17th consecutive month, signaling broadening price pressure and potentially increasing the case for an exit from ultra-easy monetary policy.
Singapore's consumer price index inflation eased slightly in August, largely due to softer services and food prices, although increased fuel prices continued to support inflation; however, the Monetary Authority of Singapore (MAS) expects core inflation to further moderate in the coming months.
Despite expectations of higher interest rates causing a spike in unemployment and a recession, the Federal Reserve's rate hikes have managed to slow inflation without dire consequences, thanks to factors such as replenished supplies, changes in the job market, and continued consumer and business spending.
Australia's inflation for August met expectations, with core inflation easing further, reducing pressure on the central bank to raise interest rates next month.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
Higher gas prices boosted an inflation gauge closely tracked by the Federal Reserve in August, but measures of underlying inflation slowed, suggesting that overall price pressures are still moderating, potentially leading the Fed to leave interest rates unchanged at its next meeting.
Overall inflation has moderated recently in the United States and euro area, but core inflation remains sticky, creating a challenge for central banks trying to meet their inflation targets. Financial conditions have eased, complicating the fight against inflation by preventing a slowdown in aggregate demand. The combination of loose financial conditions and a monetary policy tightening cycle may have dulled the effectiveness of monetary policy. There are risks of a repricing of risk assets and potential vulnerabilities in the financial sector, emphasizing the need for central banks to remain determined in their fight against inflation.
The Reserve Bank of India (RBI) expects consumer price index (CPI) inflation to ease below 4 percent in fiscal 2024-25 if there are no further shocks and a normal monsoon, with the central bank rethinking rate cuts only if CPI inflation remains at or below 4 percent on a durable basis.
India's retail inflation is expected to drop below 6% in September due to cooling prices for essential commodities, although food inflation stood at around 10% in August.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
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