Retail Inflation Likely Eased in August, Vegetable Prices Down
Headline retail inflation in India likely eased further in August, with analysts expecting the Consumer Price Index (CPI) to fall between 3.2% and 4%. This follows a 59-month low of 3.54% in July, down from 7.44% in July 2023 and 5.08% in June 2024.
The decline in inflation is attributed to several factors, including a high base effect from July 2023 and a further reduction in vegetable prices. Notably, tomato prices have fallen significantly, providing some relief to consumers.
Analysts predict that the official CPI inflation data for August, to be released on September 12, will confirm this downward trend.
Food Prices Decline, Both Veg and Non-Veg
The Crisil Roti Rice Report indicates that the cost of both vegetarian and non-vegetarian thalis declined in August compared to the previous year and month. This is largely due to a drop in tomato prices, which account for a significant portion of the vegetarian thali cost.
Additionally, fuel costs and prices of several other essential commodities, such as vegetable oil, chilli, and cumin, have also decreased. However, an increase in onion and potato prices has partially offset these declines.
Inflation Likely to Subside Further
The Bank of Baroda's Essential Commodity Index also suggests a moderation in underlying price pressure, with the index falling to 3.1% year-on-year from 5% in July. This, along with a normal monsoon season, indicates that inflation is likely to continue its downward trajectory.
However, unseasonal and excess rainfall in some parts of the country remains a risk factor. Overall, analysts expect inflation to evolve in line with RBI expectations, potentially leading to a rate cut in December 2024.