August CPI Data: India's Retail Inflation Remains Near Five-Year Low Despite Marginal Rise Of 3.65%

India's retail inflation remained at near a five-year low even after it rose marginally in August, driven by the rise in vegetable prices. The Consumer Price Index-based inflation rose to 3.65% last month, compared to 3.54% in July, according to data by the Ministry of Statistics and Programme Implementation on Thursday.

A Bloomberg poll of economists had pegged the inflation at 3.42% for August. Core inflation- that excludes the impact of volatile food and fuel, rose to 3.44% in August.

In July, the inflation was the lowest in nearly five-years. Despite the uptick in August, it remains within the central bank's target of 4% aided by the base effect.

Rating agency ICRA estimates the headline CPI inflation to rise to about 4.8% in September 2024, led by a sharp uptick in the food and beverages inflation print amid the fading of the elevated base.

Meanwhile, CareEdge expects the inflation to average 4.8% for the fiscal 2024-25. "If price pressures on food basket moderates, we anticipate that the RBI may initiate a shallow rate cut cycle in the second half of the fiscal year," it said.

Food and beverage prices saw a 5.3% rise in August, compared to 5.06% rise in July. Vegetable prices rose 10.7% compared to 6.8% year-on-year.

Cereal prices decreased by 7.31% in August, a drop from the 8.1% recorded in July. Inflation for meat and fish was 4.30% this month, down from 5.97% the previous month. Inflation in eggs rose to 7.14%, up from 6.8% in July. Meanwhile, the inflation rate for milk and milk products was 2.98%, slightly lower than the 3% reported last month.

Despite a sequential decline in food prices, an unfavourable base effect has kept food inflation elevated in August, CareEdge's Chief Economist Rajani Sinha said in an emailed statement. "The overall outlook for the agriculture sector has improved due to a good monsoon and improved kharif sowing. However, challenges remain, particularly with the uneven distribution of monsoon rainfall."

The price of oils and fats fell by 0.86%, in contrast to a decline of 1.2% in the previous month. Pulses inflation decreased to 13.60%, down from 14.8% last month.

"The global edible oil prices have recently exited a deflationary period due to global factors, and the risk of these prices passing through to the domestic consumption basket remains a key concern," Sinha said, adding, "monitoring the food prices is crucial going ahead, as risks to food inflation have not been entirely mitigated."

Clothing and footwear inflation stood at 2.75%, compared to 2.7% in the previous month. Housing inflation was recorded at 2.66%, a slight decrease from the 2.7% reported last month.