India’s retail inflation eases, remains in line with RBI’s 4% target

After crossing the 5 percent mark in June, India’s retail inflation rate has fallen sharply in July. According to data released by the Ministry of Statistics and Program Implementation on Monday, retail inflation or the Consumer Price Index stood at 3.54 percent in July.

In June, breaking the moderation seen in previous months, it rose to 5.08 per cent due to rising food prices.

The year-on-year inflation rate based on the all-India Consumer Price Index (CPI) fell sharply in July to its lowest in 59 months.

The year-on-year inflation rate based on All India Consumer Price Index (CPI) numbers is 3.54 percent (provisional) for the month of July, 2024. The corresponding inflation rates for rural and urban are 4.10 percent and 2.98 percent, respectively.

Food inflation for July 2024 is the lowest since June 2023. The year-on-year inflation rate based on the all-India Consumer Food Price Index (CFPI) numbers is 5.42 per cent (provisional) for the month of July, 2024. The corresponding inflation rates for rural and urban are 5.89 per cent and 4.63 per cent, respectively.

Rising food prices continue to be a headache for Indian consumers, with food sector inflation nearly doubled year-on-year in June.

Food inflation nearly doubled to 8.36 per cent in June from 4.63 per cent in the same month of 2023.

Food prices continue to be a problem for policymakers in India, who want to bring retail inflation to 4 percent on a sustainable basis. But today’s inflation data shows that inflation is in line with the desired target.

Annual retail inflation stood at a 12-month low of 4.75 per cent in May, marginally lower than 4.83 per cent in April. Retail inflation or the consumer price index stood at 5.7 per cent in December last year, and has been moderating since then.

Retail inflation in India was at the RBI’s comfortable level of 2-6 percent, but above the ideal 4 percent scenario.

Inflation has been a concern for many countries, including advanced economies, but India has kept its inflation trajectory largely under control. Except for June, the decline in retail inflation month-on-month has come soon after the RBI maintained status quo on the repo rate for the ninth consecutive occasion.

Excluding the recent pauses, the RBI has cumulatively increased the repo rate by 250 basis points since May 2022 in the fight against inflation. Raising interest rates is a monetary policy tool that generally helps suppress demand in the economy, leading to a decline in the inflation rate. The repo rate is the interest rate at which the RBI lends to other banks.