NEW DELHI: Retail inflation inched up marginally in Aug, led by vegetable and some food prices, but remained below the Reserve Bank of India‘s 4% target for the second month in a row, providing room to the central bank to move on interest rates later this year.
Data released by NSO on Thursday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 3.7% in Aug, a tad higher than the previous month’s 3.6%. Food inflation also moved up marginally to 5.7% in Aug compared to 5.4% in July. Rural inflation was higher at 4.2% during the month, while urban was at 3.1%. Vegetable prices rose 10.7% during the month, while pulses and products were up 13.6%. Food & beverages inflation was at 5.3%.

“We expect food inflation to ease relative to last fiscal given the good progress of monsoon and kharif sowing. Softer food inflation should pave the way for the RBI to initiate rate cuts. In our base case, we expect two rate cuts this fiscal,” said D K Joshi, chief economist at ratings agency Crisil.
Separate data released by NSO showed industrial output growth at 4.8% in July, slightly higher than the 4.7% in June but below the 6.2% recorded in July last year.
“India’s industrial output growth increased to 4.8% in July, following an upwardly revised growth of 4.7% in the previous month. The moderation in growth of electricity and mining sectors was balanced by an acceleration in the manufacturing sector,” said Rajani Sinha, chief economist at ratings agency Care Edge.