NEW DELHI, Sept 12 (Askume) – India’s retail inflation remained below the central bank’s 4% target for a second consecutive month in August but vegetable prices continued to rise, dampening hopes of an easing of the stance at the next monetary policy meeting.
Annual retail inflation (INCPIY=ECI) stood at 3.65% in August, higher than July’s revised 3.60% and economists’ forecast of 3.5% .
India’s key inflation index fell below the Reserve Bank of India’s 4% target in July after nearly five years, mainly due to a high base effect.
Food prices, which account for nearly half of retail inflation, rose 5.66% in August and 5.42% in the previous month.
Vegetable prices rose 10.71% in August and 6.83% in the previous month. Inflation in cereals was 7.31% in August, compared to 8.14% in the previous month; inflation in pulses was 13.6%, compared to 14.77% in July.
“The marginal increase in inflation in August was mainly due to an unexpected rise in food prices,” said Upasana Bharadwaj, economist at Kotak Mahindra Bank.
The risk of food inflation rising remains, but could be partially mitigated by the sudden fall in global oil prices to a three-year low.
Above normal rainfall due to the delayed onset of the annual monsoon,This could harm India’s summer crops such as rice, cotton, soybean, maize and pulses, which are harvested from mid-September.
This could push up grain prices, but the rain could also increase soil moisture, benefiting crops such as winter-sown wheat, rapeseed and beans.
The Bank of India kept key interest rates unchanged in its ninth consecutive meeting in August , and the market generally expected the Bank of India to cautiously promote monetary policy easing.
“We expect the RBI to maintain the current policy rate for now,” said Sujan Hajra, economist at Anand Rathi Shares and Stock Brokers.
The next monetary policy meeting is scheduled to be held on October 7-9.
Excluding volatile food and energy prices, the core inflation rate remains around 3%, expected to range between 3.3% and 3.4% in August, compared with 3.35% and 3.40% in July, three economists said.
The Government of India does not release headline inflation data.
