August Retail Inflation Hits 3.65%, Vegetables and Pulses See Price Surge

Retail inflation in August rose to 3.65%, with vegetables and pulses experiencing double-digit price increases, as per official data released on Thursday. Despite this rise, the Consumer Price Index (CPI) based retail inflation remained below the Reserve Bank's median target of 4% for the second consecutive month. In July, it had hit a five-year low of 3.6%. The headline inflation was 6.83% in August 2023.

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The National Statistical Office (NSO) reported that the year-on-year inflation rate of 3.65% for August 2024 is the second lowest in the last five years. Inflation in vegetables was recorded at 10.71%, while pulses and related products saw a rise of 13.6%. Conversely, spices and oils and fats experienced negative inflation rates of -4.4% and -0.86%, respectively.

Food Basket Inflation

The overall inflation in the food basket stood at 5.66%, slightly higher than the previous month's 5.42%. Food inflation for August 2024 is the second lowest since June 2023. Notably, 'tomato' exhibited the lowest year-on-year inflation at -47.91% and the lowest month-on-month change in index at -28.8%, according to NSO data.

Inflation in the fuel and light segment also showed a negative trend at -5.31%. Retail inflation was recorded at 3.14% in urban centres and 4.16% in rural areas. Bihar experienced the highest inflation at 6.62%, while Telangana had the lowest at 2.02%.

Regional Variations

The government has tasked the RBI with maintaining inflation at 4%, with a margin of 2% on either side. Inflation has stayed below 6% since September 2023. Aditi Nayar, chief economist at ICRA, commented on the data, stating, "With the base effect normalising, we anticipate a sharp pickup in CPI inflation to about 4.8% in September 2024, ranging between 4.4% and 4.7% in H2 FY2025."

Although core-CPI inflation eased slightly to 3.5% in August from July's 3.6%, Nayar expects this dip to be temporary. "We expect core CPI inflation to inch up through the rest of the fiscal year, despite recent moderation in commodity prices, due to demand for services and a year-on-year decline in cotton sowing," she added.

Data Collection

The NSO collects price data from selected markets across all states and Union Territories (UTs). In August 2024, prices were collected from all villages and nearly all urban markets (98.6%). This comprehensive data collection ensures accurate reflection of price changes across different regions.

Retail inflation figures provide crucial insights into economic conditions affecting consumers nationwide. The variations between urban and rural areas highlight differing economic pressures faced by these populations.

The government's focus on maintaining a stable inflation rate is evident through its directives to the RBI and monitoring mechanisms like NSO's data collection efforts.

These statistics are vital for policymakers to make informed decisions aimed at stabilising prices and ensuring economic growth while protecting consumer interests.