India’s retail inflation eased to 6.83% in August, as per the latest National Statistics Office data released on Tuesday.  This comes after retail inflation jumped to a 15-month high of 7.44 per cent in July as prices of vegetables and other food items spiked.

The number is still above the RBI upper tolerance limit of 2 percent-6 percent for a second month.

The Consumer Price Index (CPI) based inflation was at 4.87 in June and 6.71 per cent in July 2022.

The inflation in the food basket was 11.51 per cent in July compared to 4.55 per cent in June and 6.69 per cent in July 2022, as per the data.

In July, the retail inflation in vegetables year-on-year was 37.43 per cent while the rate of price rise in ‘cereals and products’ was 13 per cent.

Meanwhile, the Reserve Bank Governor Shaktikanta Das recently said the central bank is firmly focused on bringing down inflation to 4 per cent and remains prepared to undertake policy responses to deal with supply shocks, which have become more frequent with profound implications.

The current episode of high global inflation and preceding overlapping shocks of the pandemic and Russia-Ukraine war have raised significant issues and challenges for the conduct of monetary policy, the governor had said.

He said the monetary policy framework in India has evolved in line with the developments in theory and country practices, the changing nature of the economy and developments in financial markets. Within the broad objectives, the relative emphasis on inflation, growth and financial stability has, however, varied across monetary policy regimes since independence.

Das listed out steps the central bank took to deal with the situation created in the wake of the COVID pandemic and the Russia-Ukraine war.

Following the outbreak of the war, the central bank raised the policy rates by 250 basis points since May 2022.

“After a near-zero policy rate for a prolonged period, central banks in these (advanced) economies started raising interest rates aggressively in 2022, which contributed to stress in certain banks in these economies. In contrast, our battle against inflation is not constrained by financial stability concerns. In fact, even during the COVID phase, we continuously took measures to strengthen financial stability,” the governor said.

Headline inflation based on the Consumer Price Index (CPI) had eased to 4.8 per cent in June 2023 from the peak of 7.8 per cent in April 2022. It, however, surged to 7.4 per cent in July, mainly on account of a spurt in vegetable prices, which have already started moderating.

Having touched a 15-month high of 7.4 per cent in July, retail inflation was expected to remain elevated in August as well, due to rising prices of cereals.

However, sources said, it is expected to start moderating from September onwards due to fall in prices of vegetables like tomatoes, restrictions imposed on the export of non-basmati rice and cut in the prices of domestic LPG cylinders.

In another survey by news agency Reuters, Inflation in India was likely to have eased in August from a 15-month high in July, led by cooling vegetable prices, but held above the upper end of the Reserve Bank of India’s 2%-6% target for a second month.

The September 4-7 Reuters poll of 45 economists had predicted the consumer price index rose 7.00% in August compared to a year ago, a dip from 7.44% in July. The data will be released on Tuesday.

Forecasts ranged between 6.50% and 7.65%, with almost two-thirds of respondents expecting inflation to be 7.00% or higher.

(With agency inputs)