For the Initial months, there has been a rise in inflation after the implementation of Goods and Services Tax from 1st July across the country. Just for the example, from past five months, the wholesale inflation has been continuously dropping and has enhanced to 1.88 percent in the month of July whereas retail inflation extended to 2.36 percent in July.
This level of inflation is way below the Reserve Bank’s annual target of inflation, but due to the sudden increase in inflation, it can be challenging for the government in upcoming years. The wholesale inflation is 0.90 percent in 2017 whereas it was 0.63 percent in July 2016.
Likewise, the retail inflation was only 1.46 per cent in the month of June whereas it was 6.07 percent in July 2016. Inflation arose due to the increase in prices of goods and services after the roll-out of new indirect tax regime from 1st July just when the government has introduced biggest tax reform GST across the country.
Read Also: Goods and Services Tax Impact on Export Industry in India
While checking out the wholesale inflation, two months ago the food inflation was zero which has enhanced to 2.15 percent in the month of July. The main reason for increasing inflation is green vegetables whose inflation rate was more than 21 percent in July as compared to June.
Some food items such as potatoes continuously declined in the wholesale prices. The prices of potatoes continuously fallen down by 42.45 per cent in the month of July 2017 as compared to July 2016. Similarly, the prices of onions were also falling down.
Manufacturing products inflation rate also diminished from 2.27 percent to 2.18 percent in June. Likewise, the wholesale price of fuel and electricity has diminished in the month of July from 5.28 per cent to 4.37 per cent as compared to June.
Recommended: Goods and Services Tax Effects on Factory Production in India
Higher prices of sugar and confectionery products were also the reason behind the increased retail inflation in the month of July. However, the retail prices of food items were seen in July and the inflation in this category was 0.29 percent, in June it was -2.12 percent. Pulses, spices, and vegetables are some of the items which have seen a large dip in the retail inflation.
The pace of retail inflation in villages is higher as compared to cities. In Rural areas, retail inflation was 2.41 percent in the month of July as compared to cities. It must be noted that the government has introduced GST across the country since 1st July 2017. However, it is difficult to say that, how much inflation rate has been fluctuated after the implementation of GST, as all this is a market analysis.
