India’s retail inflation cooled down marginally to 5.30 per cent in August in comparison with 5.59 per cent in July, according to official data released by the government.
For the second month in a row, retail inflation, as measured by the consumer price index (CPI), has remained within the Reserve Bank of India’s (RBI) target range of 2% to 6%. It is, however, still higher than the central bank’s medium-term objective of 4%.
The welcome decline in the CPI inflation in August 2021 was broad-based, led by all the components except clothing and footwear, and fuel and power. Contrary to our apprehension, the CPI inflation receded appreciably, led by lower than expected food inflation,” said Aditi Nayar, Chief Economist, Icra Ltd.
While food prices fell in August, the minimal drop was due to ongoing supply chain disruptions that have resulted in increased costs in a variety of goods across multiple industries.
Food inflation decreased to 3.11 per cent in August from 4 per cent in July, according to new inflation statistics issued by the National Statistics Office (NSO), as vegetable prices fell during the month.
“In month-on-month terms, the food & beverages basket remained flat, with downticks in eggs, meat and fish, fruits, pulses and cereals, absorbing the upticks in milk, oils and fats, vegetables, sugar and spices,” said Nayar.
Consumer Food Price Inflation (CFPI) in August stood at 3.11 per cent compared to 3.96 per cent in July.
Last year in August, the CFPI was calculated at 9.05 per cent.
The ease of retail inflation in August may come as a sigh of relief for customers ahead of the festive season. But, the data showed that edible oil prices remained quite high as ‘oils and fats’ inflation in August came in at 33 per cent.
Higher inflation in fuel and light inflation(12.95 per cent) and services inflation (6.4 per cent) hit back at the marginal drop in food prices.
“At present, we believe policy normalisation could commence in February 2022, with a change in the stance of monetary policy to neutral from accommodative, followed by a hike in the repo rate of 25 bps each in April 2022 and June 2022 meetings,” Nayar added.