India’s retail inflation eases to four-month low of 5.3% in August

By Administrator_ India

Capital Sands

Retail inflation cooled to a four-month low of 5.3 percent in August from 5.59 percent in the previous month, led by subdued prices of food articles and a high base effect. Inflation based on the Consumer Price Index (CPI) remained within the Reserve Bank of India (RBI)’s tolerance band for the second consecutive month, according to the data released by the Ministry of Statistics and Programme Implementation, on Monday.

While economists estimate inflation to ease further in the coming months, they believe that the RBI will continue with its accommodative monetary policy stance and begin interest rate hikes only in the next fiscal year, amid risks to the growth outlook.

Food inflation declined to a seven-month low of 3.11 percent compared to 3.96 percent in July. Fuel inflation remained elevated and increased to 12.98 percent in August compared with 12.38 percent in the previous month. The inflation rate for petrol increased to 24.01 percent in August from 23.70 per cent in July, while for diesel, it eased marginally to 22.06 per cent from 22.71 per cent in July.

The core-CPI inflation, which is non-food and non-fuel, eased to 5.5 percent in August from 5.7 per cent in the previous month.

The six-member monetary policy committee (MPC) had raised the inflation projection for the current fiscal year by 60 basis points (bps) to 5.7 percent in the August meeting. The MPC resolution had also put the onus of bringing down petrol and diesel prices on the Union and state governments through tax reduction.

Retail inflation had breached the RBI’s target of 2-6 percent in April as the Covid-induced lockdown impacted supply. Retail inflation has now remained over 5 percent for the seventh straight month and over the RBI’s target rate of 4 per cent for the 23rd straight month.

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