Prime Minister Narendra Modi made a mistake during his Independence Day speech on Monday when he said that (retail) inflation did not cross six per cent. The statement has come three days after his government published data showing inflation hitting a two-year high of 6.07 percent in July.
The spike was even more at 8.35 per cent for food prices, according to statistics released by the ministry of statistics and programme implementation.
"Under the previous government, the inflation level had crossed the 10 per cent mark. But we did not let it rise above 6 per cent," Modi said, while delivering his speech from the Red Fort on 70th year celebrations of India's independence.
Further, at 6.07 percent, inflation was also above the target of four per cent (+/- 2 percent) set by his government, along with the Reserve Bank of India (RBI), as notified on August 5.
Apart from being technically wrong, Modi's claims on inflation are also in sharp contrast to the RBI's monetary policy statement of August 9 on rising prices.
The recent sharper-than-anticipated increase in food prices has pushed up the projected trajectory of inflation over the rest of the year. Moreover, prices of pulses and cereals are rising and services inflation remains somewhat sticky," RBI governor Raghuram Rajan had said in his policy statement last Tuesday.
He then warned that hopes of receding food prices could be negated by rising crude oil prices.
"The prospects for inflation excluding food and fuel are more uncertain; if the current softness in crude prices proves to be transient and as the output gap continues to close, inflation excluding food and fuel may likely trend upwards and counterbalance the benefit of the expected easing of food inflation."
A note by an analyst said that inflation is likely to remain firm in August as well. "The jump in Jul CPI inflation was along expected lines, with Aug's reading to also stay above the central bank's target," Radhika Rao, economist, group research, DBS Bank, said in a note on Monday.