India’s retail inflation dropped to 3.54% in July, lowest since 2019
India's retail inflation dropped to 3.54% in July, lowest since 2019
India’s retail inflation dropped to a significant low of 3.54% in July, down from 5.08% in June, according to data released by the Ministry of Statistics and Programme Implementation. This marks the lowest inflation rate since August 2019 and is the first time since September 2019 that inflation has fallen below the Reserve Bank of India’s (RBI) target of 4%.
The decline in inflation was primarily driven by a high base effect from the previous year, when inflation peaked at 7.44% in July 2022. Economists had forecasted an inflation rate of 3.65% for July, highlighting the unexpected scale of the decline.
Food and beverage prices, which account for nearly half of the Consumer Price Index (CPI), saw a substantial decrease. The year-on-year rise in food prices slowed to 5.06% in July, down from 8.36% in June. Specifically:
– Vegetable prices: Increased by 6.83% in July, down from 29.32% in June.
– Cereal prices: Rose by 8.14%, compared to 8.75% in June.
– Pulses prices: Increased by 14.77%, down from 16.07% in June.
– Meat and fish prices: Inflation rose to 5.97%, up from 5.39% in June.
– Egg prices: Jumped to 6.76%, from 3.99% in June.
– Oils and fats: Declined by 1.17%, an improvement from a 2.68% decline in the previous month.
However, core inflation, which excludes food and fuel, saw an uptick to 3.37% in July from 3.15% in June. This marks the first significant rise in core inflation since September 2022, driven largely by increases in telecom tariffs and gold prices.
Economic experts caution that the decline in overall inflation is largely due to the high base effect, rather than a genuine reduction in prices. The future trajectory of inflation will likely depend on upcoming crop yields and the effects of the monsoon season on food prices.
Earlier this month, the RBI’s monetary policy committee maintained the benchmark repo rate at 6.5%, while continuing to monitor inflationary pressures closely.
