Pranav Mathur, Pune
The retail inflation in India creeped up to 3.65% for the month of August, slightly higher in comparison to the 3.6% increase in July. Although there is a steady rise, it is still within the target of 4% set by the Reserve Bank of India (RBI), according to the data that was released by the government on Thursday. This rise is still much lower in comparison to the 6.83% that was recorded in August last year, indicating a considerably much more stable economic environment. There is a margin of 2% on either side of the 4% target given to the RBI by the government on the retail inflation rate. The August Consumer Price Index is the second lowest taking into account the last five years.
The food bracket had also seen a slight increase in inflation rate in August to about 5.66% from the 5.42% in July, in accordance with the data released by the National Statistical Office (NSO). This too is a significant decrease with regards to the 9.94% in August last year. When it comes to the inflation rate in rural and urban India, the rates are 3.14% and 4.16% respectively.
Sujan Hajra, Chief Economist, anticipates the RBI will keep its present policy rate in place for the time being regardless of the easing of inflationary pressures, lower-than-expected GDP growth for the quarter ending in June 2024, and the possibility of a rate decrease by the US Fed. But the central bank’s outlook and forward guidance are probably going to become more dovish, suggesting possible future easing.
As the elevated base fades, ICRA projects that the headline CPI inflation will increase to about 4.8% in September 2024 from 3.7% in August 2024, driven mostly by a strong increase in the inflation print for food and beverages. Even with the predicted stiffening in September 2024, average CPI inflation will be lower than the 4.6% MPC projection for the financial year of 2025.
Going a little further from the food basket, the rate has gone up to 10.71% from 6.83% last month for vegetables and the rate has gone down for pulses to 13.60% from the previous month’s 14.77%.