News Business Retail inflation declines to 3.54 per cent in July, lowest in nearly five years

Retail inflation declines to 3.54 per cent in July, lowest in nearly five years

India's retail inflation eased to 3.54 per cent in July, falling below the Reserve Bank of India's 4 per cent target for the first time in years.

Retail inflation, Retail inflation declines Image Source : FILE PHOTO Representative image

New Delhi: Retail inflation fell to 3.54 per cent in July, dipping below the Reserve Bank's 4 per cent target for the first time in nearly five years, government data showed on Monday. This decline was driven by a cooling in food prices.

The Consumer Price Index (CPI) based retail inflation fell to 3.54 per cent in July, a decrease from 5.08 per cent in June 2024 and 7.44 per cent in July 2023. Inflation in the food basket was 5.42 per cent in July, down from 9.36 per cent in June, according to data from the National Statistical Office (NSO). 

The last time inflation was below 4 per cent was in September 2019. The government has tasked the Reserve Bank of India (RBI) with maintaining CPI inflation at 4 per cent with a permissible margin of 2 per cent on either side.

Food inflation was doubled to 8.36 per cent in June

Rising food prices have been a significant concern for Indian consumers, with food inflation nearly doubling year-on-year in June. It surged to 8.36 per cent compared to 4.63 per cent in the same month of 2023. This persistent increase in food prices has been a challenge for Indian policymakers, who aim to maintain retail inflation at a sustainable 4 per cent. However, recent inflation data indicates progress towards this target. 

In May, annual retail inflation fell to a 12-month low of 4.75 per cent, slightly down from 4.83 per cent in April. The Consumer Price Index (CPI) recorded 5.7 per cent in December last year but has since been moderating. Although retail inflation has been within the RBI's comfort zone of 2-6 per cent, it was previously above the ideal 4 per cent target.

Inflation: Concern for many countries

Inflation has been a concern globally, including for advanced economies, but India has managed to navigate its inflation trajectory relatively effectively. The easing of month-on-month retail inflation, with the exception of June, follows the RBI's decision to keep the repo rate unchanged for the ninth consecutive time.

Since May 2022, the RBI has cumulatively increased the repo rate by 250 basis points to combat inflation. Raising interest rates is a common monetary policy tool used to curb demand in the economy, which in turn helps reduce inflation. The repo rate is the interest rate at which the RBI lends to other banks.

(With agencies input)

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