After falling to 1.61 per cent in July, retail inflation has inched upwards marginally in the weeks thereafter. Inflation, as measured by the consumer price index, stood at 2.07 per cent in August as per data released by the National Statistics Office. With this latest reading, inflation has averaged 1.84 per cent so far in the second quarter (July-August) of the year, lower than the central bank’s most recent projection of 2.1 per cent made in the last monetary policy committee meeting. Since February this year, inflation has remained below the RBI’s target of 4 per cent.
This moderation is largely due to falling food prices. The consumer food price index, which had touched 10.87 per cent in October last year, had declined to 3.75 per cent by February, and moved into deflation in June, July and August. Within the food category, the sharpest falls in August have been observed in vegetables and pulses. Oils and fruits though saw elevated inflation. While excess rainfall in parts of the country may cause some crop damage, it is unlikely to significantly affect output. Any shortfall in kharif will possibly be made up in rabi. This suggests that food inflation is likely to remain under control in the near term. In contrast, core inflation, which excludes the volatile food and fuel components, remains range bound. Inflation remained muted in most categories such as clothing and footwear, household goods and services and education. The exception being the personal care and effects segment, where inflation was at 16.61 per cent.
