Retail Inflation Eases in India, Food Prices Key Factor

In a recent report by the Ministry of Statistics and Program Implementation, retail inflation in India saw a decline to 6.38 percent in August, signaling a positive turn of events. This comes after a sharp rise to 7.44 percent in July, primarily driven by soaring vegetable prices, including tomatoes. Contrary to expectations, the August inflation rate was lower than anticipated by economic observers, who had predicted it to remain above seven percent.

The significant drop in food prices emerged as the primary contributor to this decrease. In July, food price inflation had surged to 11.51 percent but decreased to 9.94 percent in August. Notably, the spike in vegetable prices moderated from 37.4 percent to 26.3 percent during this period. The state of Kerala also witnessed a reduction in retail inflation, dropping from 6.43 percent in July to 6.40 percent in August.

It’s noteworthy that this marks the second consecutive month where inflation has exceeded the Reserve Bank of India’s (RBI) tolerance limit of 2 to 6 percent, albeit remaining below forecasts. Furthermore, this has extended a streak of four months where the inflation rate has remained above the RBI’s medium-term target range of four percent.