August retail inflation at 3.65%, below RBI target for second month; food prices moderate

New Delhi [India], September 12 (ANI): India’s retail inflation remained below RBI’s 4 per cent target for the second consecutive month. According to data released by the Ministry of Statistics and Programme Implementation on Thursday, retail inflation or Consumer Price Index in August was at 3.65 per cent.

August retail inflation is the second lowest in the last five years.

The year-on-year inflation rate based on the All India Consumer Food Price Index (CFPI) number is 5.66 per cent (provisional) for August 2024. The corresponding inflation rate for rural and urban is 6.02 per cent and 4.99 per cent, respectively.

The decline in inflation was observed in the subgroups of ‘Spices’, ‘Meat and Fish’ and ‘Pulses and products’ in August. Food inflation for August 2024 is the second lowest since June 2023. At the item level, ‘tomato’ has exhibited the lowest year-on-year inflation (- 47.91 per cent).

Breaching 5 per cent in June, the retail inflation rate in India softened drastically in July at 3.54 per cent.

In June, taking a departure from the moderation it witnessed in the past months, it rose to 5.08 per cent, pushed by rising food prices.

In July, there was a sharp decline in the year-on-year inflation rate based on the All India Consumer Price Index (CPI), which was the lowest in the last 59 months.

Rising food prices had continued to be a headache for Indian consumers with the inflation rate in the food segment almost doubling year-on-year in June.

The food inflation had almost doubled to 8.36 per cent in June, versus 4.63 per cent reported same month of 2023.

Food prices continue to remain a pain point for the policymakers in India, who wish to bring retail inflation to 4 per cent on a sustainable basis. But today’s inflation data once again reaffirms that the inflation has aligned with the intended target.

Annual retail inflation in May was at a 12-month low of 4.75 per cent, marginally down from 4.83 per cent in April. The retail inflation or Consumer Price Index, in December last year was 5.7 per cent, and since was moderating.

The retail inflation in India was in RBI’s 2-6 per cent comfort level but was above the ideal 4 per cent scenario.

Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. The eased month-on-month retail inflation, barring June, came on the heels of RBI having maintained the status quo in the repo rate for the ninth straight occasion.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. The repo rate is the rate of interest at which the RBI lends to other banks.