Retail inflation falls to 6.83% in August as vegetable prices cool a bit

• The retail inflation remains well above the RBI's tolerance limit of 6% for the second consecutive month.
• The slide in CPI inflation was due to fall in prices of vegetables, meat and egg products and fish.
• Prices of cereals, milk and fruits as well as spices rose significantly.

India's retail inflation measured by consumer price index (CPI), fell to 6.83% in August against 7.44% in July, as food inflation lowered to 9.94% in August from 11.51% in July. Retail inflation in August 2022 was 7% while food inflation was 7.62%.

The retail inflation though remained well above the RBI's tolerance limit of 6% for the second consecutive month.

Speaking about the reading, Aditi Nayar, Chief Economist, Head Research & Outreach, ICRA said that she expects CPI inflation in the range of 5.3-5.5% in September 2023 which will still entail an average of 6.6% for Q2 FY2024.

"We expect the MPC to remain on hold in October 2023, while continuing to demonstrate caution amid a cloudy outlook for food inflation and elevated crude oil prices.," she said.

The slide in CPI inflation was due to fall in prices of vegetables, meat and egg products and fish. There was some moderation in the prints for clothing and footwear, housing and miscellaneous items as well.

However, prices of cereals, milk and fruits as well as spices rose significantly in August compared to July.

Within food items, inflation in vegetables fell to 26.1% in August 2023 from 37.4% in the previous month, contributing as much as 28 bps of the 61 bps decline in the headline CPI inflation print between these months.

"Notwithstanding the reversal of the relatively transient spike in tomato prices, the outlook for food inflation remains on edge, on account of other vegetables like onions, as well as kharif crops with a YoY lag in sowing such as pulses. Well distributed rainfall in the rest of September could help to protect kharif yields, even as reservoir levels do not portend well for an early kick off of rabi sowing," said Nayar.

(With text input from IANS)