The country’s retail inflation slightly eased in August to 6.69 per cent as food prices fell, but remained above the upper limit of the RBI tolerance band of 6 per cent for the fifth straight month. Economists expect the central bank to press for another pause in policy action in the forthcoming policy.

Data released by the National Statistics Office on Monday showed food inflation eased in August to 9.05 per cent from 9.27 per cent in the preceding month.

Under the food segment, double digit inflation in case of eggs (10.1 per cent), oils and fats (12.4 per cent), vegetables (11.4 per cent), pulses (14.4 per cent) and spices (12.3 per cent) continue to push food inflation higher. Inflation in case of fuel components rose to a five-month high of 3.1 per cent in August 2020 compared with 2.7 per cent in July 2020 and (-)1.7 per cent in August 2019.

A low base effect and a rise in prices of diesel and kerosene has led to the uptick in this component from the previous month’s figures.

The government has revised downwards the retail inflation numbers for July to 6.73 per cent from the earlier estimates of 6.93 per cent.

“CPI inflation is expected to print sub-4 per cent only in December 2020-February 2021, based on which a continuation of the accommodative stance appears doubtful,” Aditi Nayar, principal economist at Icra said.

Madan Sabnavis, chief economist of Care Ratings, said: “MPC will keep this number at back of the mind when evaluating its decision in the next meeting. Inflation is well above 6 per cent while growth has slipped quite sharply. The liquidity situation is comfortable while bank credit growth has been negative. The decision may steer towards another pause in policy action.”

Sunil Kumar Sinha, principal economist, India Ratings, said: “Despite first-quarter GDP contracting 23.9 per cent, we believe policy rates are unlikely to be cut in the forthcoming monetary policy.”

Data separately released by the industry department earlier in the day showed India’s wholesale price inflation turned positive in August after a gap of four months.

The wholesale price index (WPI) inflation stood at 0.16 per cent in August against a contraction of 0.58 per cent in July as inflation for the manufactured items accelerated to 1.27 per cent from 0.51 per cent during the same period.

During August, crude oil prices softened 17.44 per cent from a year ago, while fuel prices eased by 9.7 per cent from their levels a year earlier.

The Reserve Bank of India has cut policy rates by 115 basis points so far this year, to 4 per cent. However, rising food inflation has pushed inflation higher than the upper band of the central bank's target range, forcing the RBI to put a pause in its rate cutting cycle.