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Retail inflation falls to 3.69% in August as veggie prices fall

The inflation based on Consumer Price Index (CPI) stood at 4.17% in July and 3.28% in August last year

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Retail inflation fell below 4% to a 10-month low of 3.69% in August on the back of a fall in vegetables, fruits and pulses, the data released by the Central Statistics Office data on Wednesday showed.

The inflation based on Consumer Price Index (CPI) stood at 4.17% in July and 3.28% in August last year.

Retail inflation has remained above Reserve Bank of India's (RBI) targeted rate of 4% since October last year.

RBI will be considering this set of data for formulating its next bi-monthly monetary policy on October 5. The central bank has been mandated to keep retail inflation at 4% level (with a margin of 2% on either side).

"Consumer food inflation came in at 13-month low at 0.29%. This was primarily due to decline in inflation of fruits, deflation in vegetables and continued deflation in pulses. Fuel and light inflation at 8.5% was highest in last 60 months," said Devendra Kumar Pant, chief economist at India Ratings and Research.

"The moderation in the core inflation to 5.9% in August 2018 was broad-based, which is a positive sign. The base-effect led to a fall in housing inflation to a nine month low in August 2018," said Aditi Nayar, principal economist at Icra.

"But the looming impact of revised MSPs, surge in crude oil prices and sharp weakening of the rupee would push up the inflation prints in H2 FY2019," she added.

"The dip in the August 2018 CPI inflation below the Monetary Policy Committee's medium-term target of 4.0%, juxtaposed by the looming inflation risks, the robust GDP growth print for Q1 FY2019 and the continued weakening of the rupee, would complicate the next monetary policy decision," Icra said.

On balance, the scales appear tipped toward a third consecutive rate hike in the October 2018 policy review, along with a change in stance to withdrawal of accommodation, unless crude oil prices and the rupee record an appreciable reversal in the intervening period, it said. In the August policy review meet, the six-member MPC headed by RBI governor Urjit Patel for the second time in two-month raised interest rate by 0.25% on inflationary concerns.

FALLING  PRICES

  • 10-month low - retail inflation in August
     
  • 4.17% - CPI inflation in 4.17%
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