Retail Inflation In August Eases To A Four-Month Low. Know Why

Prices of vegetables fell 11.68 per cent from a year ago, while cereals fell 1.42 per cent.

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New Delhi: The lifting of lockdown restrictions in several states in August helped in easing retail inflation to a four-month low as supply-side constraints reduced paving the way for economic recovery. The softening of food prices is expected to aid the process of economic recovery. 

What is the impact on consumer goods?

Consumer Price Index-based Inflation (CPI) for August 2021 stood at 5.30 per cent, compared with 5.59 per cent in July, according to the data released by the National Statistical Office (NSO) on Monday. In April, retail inflation stood at 4.29 per cent.

Consumer Food Price Inflation (CFPI) for August stood at 3.11 percent compared to 3.96 percent in July.
In August, prices of vegetables fell 11.68 per cent from a year ago, while cereals fell 1.42 per cent. However, retail fuel and electricity prices rose 12.95 per cent in August and transport costs rose 10.24 per cent from a year ago, the data showed.

However, edible oil prices remained a concern with 33 per cent increase year-on-year (YoY). While price of non-alcoholic beverages was also elevated by 13.85 per cent.

What are the expectations of RBI?

Economists believe that the headline inflation was softed that expectations, largely led by downward surprise of food prices. “We expect the subsequent readings to remain fairly benign and much lower than RBIs estimates," said Upasna Bhardwaj, economist at Kotak Mahindra Bank.

Last week, RBI governor Shaktikanta Das also hinted at inflation to moderate while remaining focused on growth during the pandemic, and content to operate within the 2 per cent-6 per cent and instead of a 4 per cent retail inflation target.

Aiming to return to 4 per cent inflation target, the RBI said the timing of that was not yet decided. The cooling in prices will also help the case of RBI keeping interest rates lower for longer to support economic growth.

(With inputs from agency)