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Retail

India's Retail Inflation Eases In August As Food Prices Rise More Slowly

India's annual retail inflation eased slightly in August as food inflation cooled, but remained above the upper end of the Reserve Bank of India's (RBI) medium-term target for the fifth straight month, government data has revealed.

Retail inflation in August of 6.69% was lower than the 6.85% forecast in a Reuters poll of analysts and the 6.73% registered in July.

Food inflation eased a bit last month as India unlocked most parts of its economy which helped in addressing some of the supply chain distortions that the world's strictest lockdown had created since mid-March.

Supply Constraints

But analysts said that supply constraints still remained, which is likely to keep food prices high even though agricultural production is likely to be helped by good monsoons seen this year.

Food inflation eased to 9.05% compared to 9.27% in July.

Rising coronavirus infections in India raises the risk of further supply disruptions with India seeing cases increasing faster than in any other country and it lags only the United States in total infections.

August inflation is unlikely to give the RBI room to consider a rate cut at its next policy meeting in October to revive the economy after a record 23.9% contraction in GDP in the January-March quarter.

'Inflation Figure' Above 'Medium Term Target'

"The inflation figure for the fifth month in a row remains above RBI's medium term target of 6%, so RBI rate cut hopes still remains low at least at the Oct policy (meeting)," said Rahul Gupta from Emkay Global Financial Services.

The inflation data indicated that core inflation for August ranged between 5.77% and 5.80%, according to three analysts' calculations, slightly lower than 5.8%-5.9% in July.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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