India's retail inflation eases at 3.69% in August 2018; lower food price gives relief

In July month, CPI numbers surprised markets by easing to 4.17% compared to 4.92% in June 2018 and 4.87% in May 2018. This surpassed market expectations which was over 4.51%.

Representational Image: Photo: IANS

India's consumer price index (CPI) or retail inflation came in at 3.69% during the month of August 2018 lower compared to 4.17% of the previous month. However, the latest number was slightly higher compared to 3.28% in the same month of previous year.

Meanwhile, India's Consumer Food Price Index (CFPI) stood at 0.29% in August month compared to 1.30% in July month and 1.52% in August 2017.

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has revised the Base Year of the Consumer Price Index (CPI) from 2010=100 to 2012=100 with effect from the release of indices for the month of January 2015.

source: tradingeconomics.com

Provisional indices for the month of August 2018 and also the final indices for July 2018 are being released with this note for all-India and for State/UTs.

Under inflation, the Food and beverages inflation were at 0.85% this month, while Pan, tobacco and intoxicants stood at 5.34%.

Moreover, during the August month, Clothing and footwear inflation was at 4.88%, housing inflation at 7.59%, fuel & light at 8.47%. Also miscellaneous category which includes items like household goods and services, health, transport and communication, recreation and amusement, Education, personal care and effects etc witnessed inflation rate of 5.52%.

RBI has projected inflation at 4.6% in Q2, 4.8% in H2 of 2018-19 and 5% in Q1:2019-20, with risks evenly balanced. Excluding the HRA impact, CPI inflation is projected at 4.4% in Q2, 4.7-4.8% in H2 and 5% in Q1:2019-20.

RBI is an inflation trajectory central bank and every policy decision has been related to the performance of CPI inflation. RBI fears inflation pressure in second half of FY19 on the back of MSP price hike, monsoon, crude oil and HRA allowance under 7th Pay Commission.

ICICI Bank predicted India CPI inflation to move lower to 3.6% in August-2018 from 4.2% in July-2018 primarily on account of a fall in food inflation. Some moderation in core CPI inflation is also expected.”

Similarly, Teresa John, Research Analysts (Economist) said, “August 2018 is likely to come in at 3.55% YoY, down from 4.17% in the previous month. The expected seasonal increase in food prices, particularly of vegetables, has been muted, which may result in inflation surprising on the downside.”

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