NEW DELHI: Consumer price-based inflation dropped to a nearly five-year low at 3.54 percent in July, according to the data released by the Ministry of Statistics and Programme Implementation on Monday.
This decline is on account of moderation in food price increases, which fell to 5.4% from a six-month high of 9.4% in June. The decrease was also influenced by base effects from the previous July, when retail inflation was at 7.4% and the food index had risen by 11.5%.
In July, urban inflation fell to just below 3%, down from 4.4% in June. Meanwhile, rural inflation came in at 4.1%, as against 5.7% in the previous month. Food price inflation was also more pronounced in rural areas, reaching 5.9%, compared to 4.6% in urban regions. In June, rural food inflation was lower at 9.15%, while urban food prices had risen by 9.6%.
"With all of the 22 essential commodities reporting an easing in their Year-on-Year inflation rates in August 2024 (till Aug 10, 2024; as per the Department of Consumer Affairs data) relative to July 2024, the food and beverages inflation should ease further in the ongoing month, thereby dampening the headline CPI inflation to 3.4% in August 2024," said Aditi Nayar, Chief Economist with ICRA.
Nayar added that the trajectory of perishable prices however remains a key monitorable in the near-term.
The Consumer Price Index (CPI) based retail inflation was 5.08 percent in June 2024 and 7.44 per cent in July 2023.
The last time retail inflation rate was below the 4 percent mark medium-term inflation target set by the Reserve Bank of India (RBI), was 57 months ago in September 2019 when it was 3.99 percent.
The government had tasked the RBI to ensure inflation remains at 4 percent with a margin of 2 percent on either side. Inflation has remained below 6 percent since September 2023.
According to the data released by the National Statistical Office (NSO), the annual inflation in 'milk and milk products' was 2.99 percent, 'oils and fats' (-) 1.17, fruits 3.84 per cent, and spices (-) 1.43 percent.
The rate of price rise was 6.83 percent in the vegetable basket and 8.14 per cent in 'cereals and products', NSO said.
The CPI Inflation in the food basket was 5.42 percent in July, down from 9.36 percent in June, and 11.51 a year ago.
Inflation in the 'fuel and light' segment was in negative at 5.48 percent.
The NSO data further showed that inflation was more than the national average in rural India at 4.1 percent while in urban areas it was 2.98 per cent.
Among states, the highest inflation was in Bihar at 5.87 percent and the lowest in Jharkhand at 1.72 per cent.
The food and beverages segment accounted for as much as 146 bps of the 154 bps dip in the headline inflation print between these months, as anticipated, she said.
"The IMD's expectations of above normal rainfall during August-September 2024, amidst the likely development of La Nina conditions at end-August 2024, augurs well for the kharif crops, although ICRA remains watchful of the episodes of heavy rainfall and flooding across some states that could harm the standing crops and impact perishable prices during this period," Nayar says.
The Reserve Bank expects a degree of relief in food inflation from the pick-up in the south-west monsoon and healthy progress in sowing and buffer stocks of cereals continue to be above the norms.
Global food prices also showed signs of easing in July, after registering increases since March 2024.
Assuming a normal monsoon, and taking into account the 4.9 per cent inflation print in the first quarter, the RBI expects the CPI inflation for 2024-25 is projected at 4.5 percent, with Q2 at 4.4 per cent; Q3 at 4.7 per cent; and Q4 at 4.3 per cent.
The headline CPI inflation edged up to 5.08 percent in June 2024 due to higher-than-expected food inflation.
(with inputs from agencies)
