Retail inflation softens marginally to 6.69% in August

India’s retail inflation softened marginally to 6.69% in August on the back of lower food prices but the core inflation (non-food, non-fuel segment) remained at a high of 5.8%, making it difficult for the RBI to cut rates in its monetary policy review next month.

While inflation in the food prices combined was lower at 9.05% in August compared with 9.62% in July, vegetable prices rose to 11.41% from 11.29% in July.

The government has revised downwards the retail inflation for July to 6.73% from the earlier estimate of 6.93%.

Fuel and light inflation rose to 3.10% from 2.80% but inflation in housing segment cooled.

"While it is encouraging to see retail inflation cooling a bit, it remains well above the RBI mandated target of 6%. The core inflation remaining high at 5.8% and combined food price inflation over 9% despite the government opening up the economy in a phased manner for regular business is a cause of worry," Nish Bhatt, Founder & CEO, Millwood Kane International, an investment consulting firm, told DH.

"CPI inflation has remained over the 6% mark for five straight months on the back of high food inflation. High inflation has become another challenge for the government other than addressing the pandemic and slower growth rate due to the pandemic and lockdown. The current high and sticky inflation is bound to affect RBI's ability to act on rates when it meets in October.”

“CPI inflation reading, which continues to remain uncomfortably elevated, has started to trend lower providing some relief. However, several uncertainties remain ahead as supply side disruptions continue to dominate the weaker demand-side pressures along with one-off idiosyncratic factors weighing on core inflation. Going ahead, as inflation remains elevated in near term, we see limited room for policy easing, at least through the December policy,” according to Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.

Despite unlocking phases, the supply-side disruption is surging the food and fuel prices, Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services, said.

WPI inflation at 5-month high of 0.16%

The wholesale price-based inflation in India rose the most in five months, climbing 0.16% in August as manufactured products turned costlier, added PTI.

The Wholesale price index-based (WPI) inflation had remained negative for four months -- April (-) 1.57%, May (-) 3.37%, June (-) 1.81% and July (-) 0.58% -- as coronavirus induced lockdown hurt economic activity.

WPI inflation in March was 0.42%.