Retail inflation in India moderated to 6.83 per cent in August on an annual basis after surging to 7.4 per cent in July, government data showed on Tuesday. Analysts had expected inflation to remain high in September due to rising cereal prices.
Food price inflation stood at 9.94 per cent, down from 11.51 per cent in July 2023.
Overall inflation in rural and urban areas stood at 7.02 per cent and 6.59 per cent each while CFPI rose to 9.67 per cent and 10.42 per cent respectively, data showed.
CPI core inflation for August stood at 4.8 per cent as against 4.9 per cent in July.
A Reuters poll pegged the inflation rate at 7 per cent.
The retail inflation in India rose to a 15-month high of 7.4 per cent in July owing to rise in food prices spurred by seasonal fluctuations. Led by vegetables, food inflation in India soared to an over three-year high of 11.5% in July, pushing headline inflation to 7.44 per cent.
MPC member Jayanth Varma told the Reuters Global Markets Forum (GMF) in an interview that there was much greater urgency to bring inflation to within the Reserve Bank of India's (RBI) comfort band than it was to bring it to the mandated medium-term target of the centre of the band.
Last week, RBI Governor Shaktikanta Das also said that the central bank expects inflation to moderate from September onwards.
"We expect overall inflation to start moderating from September onwards. August inflation will be again very high, but we expect from September onwards inflation to go down," he had said. Das had said that prices of tomatoes have already fallen and retail prices of other vegetables are also expected to come down from this month.
The RBI Governor had said that the government has taken several steps to ensure the supply of tomatoes and other items of common need to the people at affordable prices. "In July, (retail) inflation was at a very high level. This surprised everyone. But mainly due to high prices of tomatoes and other vegetables, we were expecting it to remain high in July," he said.
Inflation in India is likely to remain elevated in the near terms but government policies will prevent it from rising further, S&P Global Ratings Economist (Asia Pacific) Vishrut Rana said recently. "That is a significant concern as it can affect grain prices in India over next few months," he said.
The government has already imposed export curbs on rice and levied a 40 per cent export duty on onions to make available enough stock in local market ahead of the festive season.
"Supplies remain very strong and the government is likely to step in to prevent significant increase in commodity, wheat and rice prices. It will help to keep food price inflation little bit low," Rana said.
Tomato prices, which had skyrocketed in July, had started cooling in late August.
"Inflation at 6.8% in August was largely food-driven as fuel and core inflation remained soft. If we take food out, headline inflation was only 4.8% in August – unchanged from the previous month. We expect headline consumer inflation to move down in September as vegetables, particularly tomatoes, have seen a sharp correction. That said, cereals and pulses remain a worry as monsoon continues to be deficient and sowing in pulses has been 8.6% below last year’s levels. The recent spike in crude pri ..
"We expect the Reserve Bank of India (RBI) to look through the July-August lift in inflation due to sharp spike in vegetable prices and maintain status quo on rates and stance in the October Policy," he added.
Joshi said food inflation will remain a key monitorable for them because, if sustained, it can spill over to other components and steer the headline CPI inflation above the RBI’s target. And this can constrain monetary policy as central banks do respond to inflation when it starts becoming generalised. "We have already raised our inflation forecast to 5.5% for this fiscal from 5% earlier," he added.
"Fiscal policy interventions helped in reducing volatility within prices of key food items like cereals, pulses and vegetables. This enabled the overall retail inflation to inch lower in August. Monetary policy makers should get some room to continue with the pause in rate hikes, in the October meeting, assuming food ..
Source Name : Economic Times