Retail Inflation: A little on the inflation front! Retail inflation declined from 7.4% to 6.83% in August

India’s retail inflation declined to 6.83 per cent in August, according to data released by the Ministry of Statistics and Program Implementation (MoSPI) on Tuesday. The main reason for this is that the prices of vegetables decreased compared to last month. Retail inflation rose to 7.44 per cent in July from 4.87 per cent in June, mainly due to higher food prices. This is the second consecutive month that CPI inflation has exceeded the upper limit of the Reserve Bank of India’s (RBI) tolerance level of 2-6 per cent. This is the 47th consecutive month that it has remained above the central bank’s medium-term target of 4 percent. One basis point is one hundredth of one percentage point.

Economists had initially predicted retail inflation for August to decline to around 7 percent, with official data showing an even more favorable figure. Interestingly, the inflation rate in rural areas was slightly higher at 7.02 percent compared to 6.59 percent in urban areas. The moderation in retail inflation can be partly attributed to decline in vegetable prices. However, it is important to note that prices of some essential commodities like cereals, pulses, milk and fruits have increased marginally during this period.

The good news is that the situation has improved significantly and experts expect inflation to decline gradually in the coming months. India’s industrial production (IIP) grew by 5.7% in July 2023, compared to 4.0% growth in the same month a year ago. This is the highest IIP growth rate in the current financial year. The growth in IIP was broad-based, with all three core sectors – manufacturing, mining and power – registering positive growth. The manufacturing sector grew by 6.3%, the mining sector by 4.2% and the power sector by 8.3%.