Retail inflation rises marginally to 3.6% in Aug, still within RBI target

India’s consumer price index (CPI)-based headline retail inflation stood at 3.65 per cent in August, showed little change from the previous month when it was 3.6 per cent. Based on CPI for August, this was the second time in nearly five years that overall retail inflation fell below the Reserve Bank of India’s 4% inflation target. The last time was July this year.

“Recent inflation readings have consistently come in below the projections of the Reserve Bank of India (RBI), indicating a softening trend. Meanwhile, in the US, inflation has hit a three-year low, and with signs of a cooling labour market, a rate cut by the Federal Reserve in September 2024 seems inevitable,” said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers.

The data released by the National Statistical Office on Thursday showed that food inflation rose slightly to 5.66 per cent from 5.42 per cent in July, driven by acceleration in the prices of pulses and products (13.60 per cent), vegetables (10.71 per cent), and cereal and other products (7.31 per cent).

Despite this easing of inflationary pressures, lower-than-expected GDP growth for the quarter ending June and the likelihood of a rate cut by the US Fed, analysts expects that the RBI to maintain its current policy rate for now. However, the central bank’s stance and forward guidance are likely to turn more dovish.

Industrial production rose 4.8% in July

The growth in the index of industrial production (IIP) increased to 4.8 per cent in July from the upward revised figure of 4.7 per cent in the preceding month. In IIP, the growth rates of the three sectors, mining, manufacturing and electricity for July were are 3.7 per cent, 4.6 per cent and 7.9 per cent, respectively. Within the manufacturing sector, top three positive contributors for the month of July 2024 are – “manufacture of basic metals” (6.4%), “manufacture of coke and refined petroleum products” (6.9%), and “manufacture of electrical equipment” (28.3%).