India’s retail inflation fell to 3.69 percent in August, lowest in ten months, driven by cheaper food items, according to data released by statistics ministry on Wednesday.
Retail inflation, measured by Consumer Price Inflation (CPI) had hit a nine month low at 4.17 percent in July and came in at 3.28 percent in August last year.
CPI is the main price gauge that the Reserve Bank of India (RBI) tracks.
The slowdown in the rate of price rise comes after the central bank hiked benchmark repo rates by 0.25 percent twice in its bi-monthly monetary policy meetings in June and August.
On August 1, the apex bank revised the inflation projection for the second half of 2018-19 to 4.8 percent from 4.7 percent earlier. For the first quarter in the next financial year, RBI projected the inflation at 5 percent.
Among factors that influenced the projection was an increase in the minimum support price (MSP) of kharif crops of at least 150 percent, volatility in global financial markets and crude oil prices as well as significant rise in core inflation, among others.
“The dip in August CPI inflation below the monetary policy committee’s medium term target of 4 percent, juxtaposed by the looming inflation risks, the robust GDP growth print for April-June 2018-19 and the continued weakening of the rupee, would complicate the next monetary policy decision,” said Aditi Nayar, Principal Economist at ICRA.
Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, fell 0.29 percent in August from 1.37 percent a month ago.
Prices of vegetables witnessed a de-growth of 7 percent in August from (-) 2.19 percent in July.
Pulses inflation for August stood at 7.76 percent in August compared to 8.9 percent in July. Similarly, sugar prices continued the negative growth trend to rise (-) 5.45 percent in August from 5.81 percent a month ago.
Fuel costs grew to 8.47 percent in August from 7.96 percent a month ago on rising crude oil prices.
Clothing and footwear inflation eased at 4.88 percent from 5.28 percent a month ago, housing inflation fell to a nine-month low of 7.59 percent from 8.30 percent in July mainly due to base effect.
Another expert said that inflation momentum remains steady and can be expected around 4 percent next month. “Today’s lower print however has been overshadowed by market volatility. All eyes over the weekend for policy intervention to contain the currency market volatility,” said Shubhada Rao, Chief Economist at Yes Bank.