Retail inflation spiked marginally to 3.65 per cent in August because of an increase in vegetable prices, while factory output slowed down to 4.8 per cent in July mainly because of a poor show by the mining and manufacturing sectors.

The consumer price index-based retail inflation was 3.6 per cent in July 2024 and 6.83 per cent in August 2023.

Inflation in the food basket was 5.66 per cent in August, marginally up from 5.42 per cent in July, according to the data released by the National Statistical Office (NSO).

D. K. Pant, chief economist, India Ratings and Research, said “the pickup was largely led by food & beverages whose inflation increased to 5.3 per cent in August 2024 (July 2024: 5.1 per cent)”.

“Nevertheless, the retail inflation remained benign owing to continued contraction in fuel and light (5.3 per cent) and an unchanged core inflation (3.4 per cent).”

“The rise in food and beverages inflation was largely led by vegetables and fruits. While vegetables inflation turned back to double-digits (10.7 per cent), fruits inflation increased to 6.5 per cent in August 2024,” he said.

“However, what was favourable was a broad-based decline in inflation of other key food items such as pulses, cereals and sugar. The positive effects of better kharif sowing would be visible only post- harvest, i.e. October 2024 onwards. Till that time, pulses inflation is expected to remain in double-digits and cereals inflation would also be above 6 per cent,” he added.

Madan Sabnavis, chief economist, Bank of Baroda, said: “From the point of view of policy, these numbers are better than expected as the RBI had projected 4.4 per cent for Q2 and for the first two months average 3.65 per cent. Hence while the number will move towards 4 per cent in September, with the base effect getting weaker, inflation will move up. RBI will look for inflation to stay low on a durable basis and hence will be circumspect again.

“We believe December will be the earliest point for considering any change in policy. The monsoon has been good but the risk factor of excess rains affecting crop prospects is something to be monitored.”

The government has tasked the Reserve Bank of India (RBI) to ensure that the CPI inflation remains at 4 per cent with a margin of 2 per cent on either side.

IIP falls to 4.8%

India’s industrial production output decelerated to 4.8 per cent year-on-year in July 2024, mainly due to poor performance of the manufacturing and mining sectors.

The manufacturing sector’s growth declined to 4.6 per cent in July from 5.3 per cent a year ago.

Mining output growth decelerated to 3.7 per cent from 10.7 per cent expansion a year ago.