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Retail inflation softens marginally to 6.69 pc in Aug; wholesale inflation at 5-month high

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Retail inflation softens marginally to 6.69 pc in Aug; wholesale inflation at 5-month high

Retail inflation softens marginally to 6.69 pc in Aug; wholesale inflation at 5-month high

Retail inflation softened slightly to 6.69 per cent in August as price rise in some food items eased, though wholesale inflation inched up to a five-month high of 0.16 per cent on costlier manufactured goods, official data showed on Monday. The consumer price index (CPI) based retail inflation was at 6.73 per cent in July, which has been revised downwards from the earlier estimate of 6.93 per cent, as per data released by the National Statistical Office (NSO). Food inflation reduced marginally to 9.05 per cent as against 9.27 per cent in July (also revised downwards from the earlier 9.62 per cent). Segment-wise, the rate of price rise in ‘cereals and products’ category came down to 5.92 per cent during the month under review from 6.96 per cent in July.

Inflation in ‘meat and fish’, ‘milk and products’ and pulses categories also slowed to 16.50 per cent, 6.15 per cent and 14.44 per cent, respectively. However, prices of eggs, fruits and vegetables accelerated at a faster pace, with inflation print at 10.11 per cent, 1 per cent and 11.41 per cent. Retail inflation in the fuel and light category too rose to 3.10 per cent (from 2.80 per cent), showed the data. “The CPI inflation printed at a higher than expected 6.7 per cent in August 2020, and was rigid at the revised level for the previous month, with a cooling of the inflation for food and housing offset by a hardening in the prints for pan, tobacco and intoxicants, fuel and light and miscellaneous items,” said Aditi Nayar, principal economist, ICRA Ltd.

With continuing supply distortions amidst localised lockdowns and heavy rainfall in some regions, the retail inflation for food and beverages barely edged downwards and remained uncomfortably high, she added.
“With the CPI inflation for August 2020 sticky at a sharp 6.7 per cent, and unlikely to recede meaningfully in September 2020, a repo cut in the upcoming policy review seems to be virtually ruled out,”Nayar said.
The retail inflation, mainly taken into account by the RBI to arrive at its policy decisions, has been above the regulator’s comfort level. The government has mandated the RBI to restrict the inflation at 4 per cent (+/- 2 per cent). Rumki Majumdar, economist, Deloitte India said over the past few months, inflation has been high due to supply disruptions. However, with every phase of the economic unlock being designed to limit economic disruptions, supply-side activities are resuming gradually. This is reflected in easing of consumer prices in August. “Going forward, we expect prices to remain unchanged or decline slightly as the oncoming festival months may generate demand but not sufficiently enough to cause inflation,”Majumdar said.

Wholesale price index (WPI) based inflation rose the most in five months, climbing 0.16 per cent in August as manufactured products turned costlier. WPI inflation had remained in the negative territory since April. Inflation in food articles during August stood at 3.84 per cent, led by vegetables and pulses at 7.03 per cent and 9.86 per cent, respectively. In egg, meat and fish segment, it was 6.23 per cent, according to a statement by the commerce and industry ministry. The rate of price rise in potato was high at 82.93 per cent, while in onion it was (-) 34.48 per cent. Fuel and power inflation fell slightly to 9.68 per cent in August, as against 9.84 per cent in the previous month. Manufactured products, however, witnessed hardening of inflation at 1.27 per cent in August, as against 0.51 per cent in July. Sunil Kumar Sinha, principal economist, India Ratings and Research said despite Q1 FY21 GDP growth plummeting to (-) 23.9 per cent, RBI is unlikely to cut policy rates in the forthcoming monetary policy.

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