Breaching 5 percent in June, the retail inflation rate in India softened drastically in July. According to data released by the Ministry of Statistics and Programme Implementation on Monday, retail inflation, or the Consumer Price Index (CPI), was at 3.54 percent in July.
In June, retail inflation had risen to 5.08 percent, driven by increasing food prices, marking a departure from the moderation witnessed in previous months. However, in July, there was a sharp decline in the year-on-year inflation rate based on the All India Consumer Price Index (CPI), making it the lowest in the last 59 months.
The year-on-year inflation rate based on the All India Consumer Price Index (CPI) for July 2024 is 3.54 percent (provisional). The corresponding inflation rates for rural and urban areas 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) for July 2024 is 5.42 percent (provisional), with rural and urban rates at 5.89 percent and 4.63 percent, respectively.
Rising food prices have continued to be a concern for Indian consumers, with the inflation rate in the food segment nearly doubling year-on-year in June. Food inflation had surged to 8.36 percent in June, compared to 4.63 percent in the same month of 2023.
Food prices remain a significant challenge for policymakers in India, who aim to bring retail inflation to 4 percent on a sustainable basis. However, the latest inflation data shows that the inflation rate has aligned with the intended target.
Annual retail inflation in May was at a 12-month low of 4.75 percent, slightly down from 4.83 percent in April. The retail inflation rate in December last year was 5.7 percent and had been moderating since then.
While retail inflation in India was within the Reserve Bank of India’s (RBI) comfort level of 2-6 percent, it was still above the ideal 4 percent scenario. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory effectively.
The easing month-on-month retail inflation, except for June, came on the heels of the RBI maintaining the status quo in the repo rate for the ninth consecutive occasion. Despite recent pauses, the RBI has cumulatively raised the repo rate by 250 basis points since May 2022 to combat inflation. Raising interest rates is a monetary policy tool that typically helps suppress demand in the economy, thereby helping to lower the inflation rate. The repo rate is the interest rate at which the RBI lends to other banks.
(With ANI Inputs)
