Retail inflation in India saw a significant decline in July, hitting a five-year low of 3.54%, according to data released by the Ministry of Statistics and Programme Implementation. This sharp decrease brings the inflation rate well below the Reserve Bank of India’s (RBI) target of 4%, offering some relief to consumers and policymakers alike.
In June, retail inflation had surged to 5.08%, driven primarily by rising food prices, marking a departure from the downward trend observed in previous months. However, July’s figures show a substantial year-on-year decline in inflation, marking the lowest rate in the past 59 months.
The All India Consumer Price Index (CPI) recorded a provisional inflation rate of 3.54% for July 2024, with rural and urban inflation rates standing at 4.10% and 2.98%, respectively. This data reflects a broader easing in price pressures across the economy.
Food inflation, a persistent concern for Indian households, also showed signs of moderation. The year-on-year inflation rate based on the All India Consumer Food Price Index (CFPI) was provisionally recorded at 5.42% for July 2024. This is a notable improvement compared to the 8.36% inflation rate in June, which had nearly doubled from the 4.63% recorded in the same month the previous year.
Despite the overall reduction, food prices continue to challenge policymakers who aim to stabilize retail inflation at the 4% mark sustainably. Nevertheless, the current inflation figures indicate a positive alignment with the RBI’s target.
Earlier this year, retail inflation was already trending downward, with May’s rate hitting a 12-month low of 4.75%. This was a slight improvement from April’s 4.83%, and a marked decrease from December 2023’s rate of 5.7%.
India’s inflation has remained within the RBI’s comfort zone of 2-6%, though it had consistently stayed above the ideal 4% level. The recent easing of inflation comes after the RBI decided to maintain the status quo on the repo rate for the ninth consecutive time. Since May 2022, the RBI has raised the repo rate by a cumulative 250 basis points in an effort to curb inflation, a monetary policy tool that typically reduces demand in the economy.
This decline in retail inflation suggests that India’s efforts to manage its inflationary trajectory are paying off, even as other economies continue to struggle with rising prices.