India’s retail inflation has fallen below RBI’s medium-term target of 4% in August leading to cheaper food rates. The data released by the statistics ministry suggests 3.69% rise in Consumer price inflation from the preceding year. This has increased the probability of interest rates to be kept on hold.
As per statistics, retail inflation was recorded lowest at 4.17% in July lowering to 3.28% in August last year. RBI’s hike in repo rate by 0.25% led to the diminishing rate of price rise.
RBI modified the inflation projection for rest half of 2018-19 on August 1 from 4.7% to 4.8%. RBI expected the inflation to be at 5% in the first quarter of coming financial year.
Rise in minimum support price of kharif crops and dynamic global financial market along with fluctuating price of crude oil were key factors which lead to estimation of inflation.
As per a news report by Moneycontrol.com, Aditi Nayar, Principal Economist at ICRA said Aditi Nayar, Principal Economist at ICRA “The dip in August CPI inflation below the monetary policy committee’s medium term target of 4 percent, juxtaposed by the looming inflation risks, the robust GDP growth print for April-June 2018-19 and the continued weakening of the rupee, would complicate the next monetary policy decision,”
Consumer food prices and Inflation
The monthly kitchen cost broke down from 1.37 in July to 0.29% in August. Vegetable prices fell from (-)2.9% to (-)7%. The inflation rate for pulses was marked at 7.76% in August. Further, sugar prices witnessed a constant negative growth from 5.18% to 5.45%. The Fuel products saw an uptrend from 7.96% in July to 8.47% in August. The inflation rate of clothing was relaxed at 4.88%. Housing inflation saw a de-growth of 7.59% which is 9 month low.