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Although India’s Retail Inflation Eased To 6.38% In Aug, Pulses Prices Continue To Rise

Although India’s August Retail Inflation Eased To 6.38% In Aug, Pulses Up Continues To Rise

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Data released by the Ministry of Statistics and Programme Implementation on September 12 showed ease in retail inflation at 6.38%. However, a caution against a staggering price rise remains as inflation continues to breach the Reserve Bank of India’s target of 4% (+/-2).

Consumer inflation marked a sluggish growth in August against July’s 7.44%, which broke the previous 15-month record. A relief in inflation came, all thanks to dropping edible oil prices and a marginal decline in vegetable inflation.

Food inflation tumbled to 9.94 percent in August from a staggering 11.51 percent in July as the Consumer Food Price Index saw a drop of 0.7 percent month-on-month.

In the food basket, vegetables noticed a steep dip, whose index fell 5.9 percent from July.

Prices of the red tomatoes that led human faces turning red out of anger back in July dropped 21.7 percent month-on-month in August, according to CPI data.

However, the drop in other vegetable prices provided no benefit as the price index for potatoes and onions rose 2.3 percent and 12.3 percent, each from July.

According to Aditi Nayar, chief economist at ICRA, the fall in the prices of vegetables accounted for as much as 28 basis points of the 61 basis point decline in the retail inflation number in August.

“Notwithstanding the reversal of the relatively transient spike in tomato prices, the outlook for food inflation remains on edge, on account of other vegetables like onions, as well as kharif crops with a year-on-year lag in sowing such as pulses. Well-distributed rainfall in the rest of September could help to protect kharif yields, even as reservoir levels do not portend well for an early kick-off of rabi sowing,” Nayar warned.

Now, when vegetable prices were decreasing, prices of cereals and pulses took a flight and rose 1.4 percent and 1.5 percent, respectively. The spices index, too, ballooned to 23.19%. Milk and milk products inflation stood at 7.7%, a tad low from 8.34% in the previous month.

Core inflation, meanwhile, declined again 4.8 percent against 4.9 percent in July.

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