India’s retail inflation falls to five-year low in July

2024-08-12 19:26:07

New Delhi: India’s retail inflation slowed to 3.54 per cent in July, the lowest in nearly five years, due to a sharp drop in food inflation, data showed on Monday.

Economists sounded a note of caution, noting that the decline in retail prices was mainly due to the base effect of high inflation last year and is likely to pick up in the coming months. The retail inflation rate based on the Consumer Price Index (CPI) was 7.44% in July 2023, compared to 5.08% in June this year.

Food inflation fell to a 13-month low of 5.42% in July from 9.36% in June, causing overall inflation to fall below the Reserve Bank of India’s 4% target rate for the first time since September 2019.

“The decline is largely due to a high base last year. For headline inflation, monsoon progress in the coming weeks will be key in determining whether the food inflation shock fades,” said Sakshi Gupta, chief economist at HDFC Bank.

This is the lowest inflation reading since August 2019. Last week, the Reserve Bank of India kept interest rates unchanged, highlighting the risk of “persistent” high food inflation. Economists do not expect this stance to change soon.

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