Inflation concerns

The consumer price index-based inflation rate for July has surprised most analysts. At a 15-month high of 7.44 per cent, it was about one percentage point above the consensus market estimate. The surge in the inflation rate was driven by prices of food items, primarily vegetables. While the overall food inflation rate came at 11.51 per cent, vegetable prices mapped by the index went up by a whopping 37.34 per cent. Cereal prices too went up 13.04 per cent. Although the surge was largely driven by food prices, analysts now expect the inflation rate to remain elevated, and significantly above the upper end of the Reserve Bank of India’s (RBI’s) tolerance band, even for August. Food prices, driven largely by