India's retail inflation cools to 3.5%, lowest in 5 years
What's the story
India's retail inflation has experienced a significant decrease, reaching a near five-year low of 3.5% in July.
This figure represents a substantial drop from the previous quarter's rate of 5.1%.
The decline was facilitated by favorable base conditions as consumer inflation had peaked at 7.4% in July last year.
However, on a month-to-month basis, prices rose by 1.4%. Food prices contributed to this increase, climbing by 2.8%. Pulses continued to be a major factor, with prices surging by double digits.
Forecast alignment
Inflation rate aligns with forecast
The recent inflation figures are in line with the Moneycontrol poll forecast of 3.6%. The predictions in this survey ranged from 3.24% to 4%.
Economists suggest that the actual inflation rate is likely to be lower than the Reserve Bank of India's (RBI) projection of 4.4% for July-September 2024.
Despite these figures, RBI has not revised its overall inflation outlook for FY25 from 4.5%.
Policy stance
RBI maintains policy rate despite inflation drop
RBI Governor Shaktikanta Das has voiced concerns over high household inflation expectations.
He emphasized that a decrease in core inflation does not necessarily warrant a change in monetary stance.
The RBI has kept the repo rate unchanged for the ninth consecutive time at 6.5% and kept the full year growth estimate at 7.2%.