Rise In Core Inflation A Challenge For Monetary Policy Committee: NIPFP’s Radhika Pandey
Core inflation, excluding food and fuel costs, rose to 3.37% in July from 3.15% in June, marking the first significant rise since Sept. 2022.
The rise in India’s core inflation, which stood at 3.37% in July against 3.15% in June, presents a potential challenge for the RBI's Monetary Policy Committee, according to Radhika Pandey, associate professor at the National Institute of Public Finance and Policy.
This uptick marks the first significant rise in core inflation since September 2022, following a period of consistent decline.
“The rise in core inflation is a cause for concern for the MPC, especially given that the decline in core inflation has been consistent over several months. Although the current rate is still below 4%, this reversal needs close monitoring to determine whether it is a temporary anomaly or a persistent trend,” Pandey told NDTV Profit, commenting on the July inflation data.
She emphasised that while the overall inflation rate has decreased, the uptick in core inflation introduces a new headwind.
Previously, food inflation had been a major concern, but now the rise in core inflation adds another layer of complexity. “It needs to be seen if this increase is a one-off event or indicative of a longer-term trend. It’s crucial to watch how this evolves in the coming months, as it could impact monetary policy decisions.”
Alongside the inflation trends, the data on industrial output has also sparked a debate among experts on the growth dynamics of the economy.
Addressing this, Pandey said, “While analysing growth dynamics through the lens of the Index of Industrial Production, there are indications of some slackening. The manufacturing sector, which constitutes a significant portion of the IIP, slowed down in June,” Pandey said.
“This slowdown, combined with weaker corporate sector results and a moderation in profitability, suggests that the manufacturing sector’s GVA (gross value added) could show some weakness, leading to potential slackening overall,” Pandey explained.
