A Vegetable Market
A Vegetable MarketIANS (File photo)

India's August retail inflation eases to 5.30% as food prices cool off

New Delhi, September 13, 2021

Base effect, along with lower food prices, eased India's August retail inflation on a sequential, and year-on-year basis.

Data, furnished by the National Statistical Office (NSO), showed that the Consumer Price Index (CPI) slipped to 5.30 per cent last month from 5.59 per cent in July.

Even on YoY basis, last month's retail inflation was lower than 6.69 per cent recorded for August 2020.

The macro-economic data assumes significance as it brings retail inflation mark in the range of the Reserve Bank of India's set target of 2-6 per cent for CPI inflation.

The declining retail inflation rate reduces the chance of the RBI to further loosen up the monetary policy.

The CPI Urban fell to 3.28 per cent last month from 4.56 per cent in July, and the CPI Rural came down to 3.08 per cent in August from 3.55 per cent in July.

As per the NSO data, the Consumer Food Price Index decreased to 3.11 per cent last month from 3.96 per cent in July.

The CFPI readings measure the changes in retail prices of food products.

In terms of CPI YoY inflation rate, pulses and products' prices jumped by 8.81 per cent, respectively, in August 2021.

Besides, meat and fish prices rose by 9.19 per cent, eggs became dearer by 16.33 per cent, and the overall price of food and beverages category was up 3.80 per cent.

However, vegetable prices declined by 11.68 per cent.

Furthermore, as per the official data, the inflation rate for fuel and light was at 12.95 per cent.

"The cooling of food & beverages inflation was the chief driver behind the moderation in the CPI inflation to a four month low 3.8 per cent in August 2021," ICRA CHief Economist Aditi Nayar said.

"In month-on-month terms, the food and 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."

India Ratings and Research's Principal Economist Sunil Kumar Sinha said: "Strong base effect resulted in the decline in retail inflation. It is seventh consecutive month of retail inflation remaining in excess of 5 per cent and 23rd consecutive month of retail inflation remining in excess of the RBI's targeted inflation rate of 4 per cent. Although monsoon rainfall were lower in August 2021, it did not impact the cereals inflation adversely."

"On the contrary, cereals witnessed seventh consecutive month of deflation. Low agriculture productivity and deflation in cereals prices may impact the rural income and, in turn, the rural demand. In fact, it is also finding a reflection in the low rural wage growth."


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