August retail inflation cools to 10-month low of 3.69%

INDIA'S GDP GROWTH5

INDIA'S GDP GROWTH5

Consumer prices rose 3.69 percent from a year earlier, down from July's 4.17 percent, the Statistics Ministry said on Wednesday.

Retail inflation cooled to an 11-month low of 3.69 per cent in August mainly due to a fall in prices of kitchen items, including fruits and vegetables, official data showed Wednesday. NDTV delivers reliable information across all platforms: TV, Internet and Mobile. The central bank has been mandated to keep retail inflation at 4 percent level, with a margin of 2 percent on either side.

The main reason for increasing the repo rate by 25 basis points is to maintain 4 percent Consumer Price Index target on a durable basis, said Reserve Bank of India (RBI) governor Urjit Patel.

CPI inflation was at 3.58 per cent in October 2017 and has remained above RBI's targeted rate of 4 per cent since then.

Slowing inflation in food prices, which make up almost half of India's consumer price index (CPI), cancelled out price rises in imported goods stemming from the weakening rupee currency.

Softening inflation could give Prime Minister Narendra Modi a boost as he faces general elections next year. A Reuters poll of economists had pegged August inflation at 3.68 per cent.

While oil prices have risen almost 15 percent this year, the rupee touched an all-time low of 72.78 per dollar on Wednesday and was expected to hover near there on a worsening trade balance.

Nationwide protests over record petrol pump prices, partly a result of the rupee slide, disrupted businesses and schools this week.

Core inflation, which excludes the volatile food and fuel sectors, was seen at around 6 percent, easing slightly from 6.3 percent in July, according to analysts.

The IMF expects the central bank to gradually tighten monetary policy in order to tame inflation.

Devendra Kumar Pant, Chief Economist, India Ratings, said a robust 1Q FY19 GDP growth, coupled with declining inflation trajectory and a relatively stable IIP growth, should make the RBI more optimistic about the economy and hold on policy rate in the forthcoming policy review in view of two back-to-back hikes.