India's retail inflation softens, align with RBI's 4% target

New Delhi, Aug 12: Breaching 5 per cent in June, the retail inflation rate in India softened drastically in July. According to data released by the Ministry of Statistics and Programme Implementation on Monday, retail inflation or Consumer Price Index in July was at 3.54 per cent.

In June, taking a departure from the moderation it witnessed in the past months, it rose to 5.08 per cent, pushed by rising food prices.

In July, there was a sharp decline in the year-on-year inflation rate based on the All India Consumer Price Index (CPI), which is the lowest in the last 59 months.

Year-on-year inflation rate based on the All India Consumer Price Index (CPI) number is 3.54 per cent (Provisional) for the month of July, 2024. The corresponding inflation rate for rural and urban is 4.10 per cent and 2.98 per cent, respectively.

Food inflation for July 2024 is the lowest since June 2023. Year-on-year inflation rate based on All India Consumer Food Price Index (CFPI) number is 5.42 per cent (Provisional) for the month of July, 2024. The corresponding inflation rate for rural and urban is 5.89 per cent and 4.63 per cent, respectively.

Rising food prices continued to be a headache for Indian consumers with the inflation rate in the food segment almost doubling year-on-year in June.

The food inflation had almost doubled to 8.36 per cent in June, versus 4.63 per cent reported same month of 2023.

Food prices continue to remain a pain point for the policymakers in India, who wish to bring retail inflation to 4 per cent on a sustainable basis. But today's inflation data shows the inflation has aligned with the intended target.

Annual retail inflation in May was at a 12-month low of 4.75 per cent, marginally down from 4.83 per cent in April. The retail inflation or Consumer Price Index, in December last year was 5.7 per cent, and since was moderating.

The retail inflation in India was in RBI's 2-6 per cent comfort level but was above the ideal 4 per cent scenario.

Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. The eased month-on-month retail inflation, barring June, came on the heels of RBI having maintained the status quo in the repo rate for the ninth straight occasion.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. The repo rate is the rate of interest at which the RBI lends to other banks.