The Consumer Price Index (CPI) for July 2013 shows inflation of 9.64%, marginally lower than the 9.87% in June. Wholesale price based inflation will come in on the 14th, but till now we’ve only see the gap widen.
From a component perspective, we see food still at 11%, the biggest concern. Housing still remains in double digits at 10.6%, and transport costs have jumped 7.5%.
Finally, while rural inflation has declined slightly to 9.14%, urban inflation shows a rise to 11.56%.
Impact: Oh come on, the 9.64% level is JUST TOO HIGH. Do whatever it takes to get this to zero or negative, even if you have to raise rates, contract money supply, sell dollars, whatever. This is just a clinically insane level now. People aren’t making any money even at 10% bank rates (post tax rates are much lower), and inflation will eat into corporate spending and cut growth severely.
It’s going to be Raghuram Rajan’s take on whether this CPI is what he looks at, or the ludicrously low WPI.