India’s retail inflation, as measured by the Consumer Price Index (CPI), dropped to 6.83 percent in August, providing some relief compared to July’s 15-month high of 7.44 percent. The decline was attributed to a cooling off in vegetable prices, which had driven up inflation the previous month.
However, while the August figure represents a notable decrease, it still exceeds the upper bound of the Reserve Bank of India’s (RBI) target range of 2-6 percent. This marks the second consecutive month that inflation has remained above the RBI’s tolerance limit and continues a streak of 47 months where it has stayed above the central bank’s medium-term target of 4 percent.
Economists had anticipated a slightly higher inflation rate, with forecasts suggesting a year-on-year price increase of 7.0 percent for August.
Factors Behind Inflation Trends
July’s alarming inflation rate of 7.44 percent was primarily driven by a significant surge in vegetable prices. However, in August, there was a partial retreat in vegetable prices, contributing to the moderation in headline inflation. This volatility in vegetable prices has played a pivotal role in shaping India’s recent inflationary trends.
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