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CPI Inflation Falls to 3.69% in Aug as Food Prices Remain in Check

Inflation is currently running below the MPC’s forecast of 4.6 percent in the second quarter of the current year.

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Business
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CPI Inflation Falls to 3.69% in Aug as Food Prices Remain in Check
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Consumer price inflation fell below 4 percent for the first time in 2018, as prices of vegetables and pulses remained in check even as fuel prices rose. The lower than expected inflation reading complicates the task for India’s Monetary Policy Committee, which may see the need to hike rates in response to a weaker rupee when it meets next in October.

Data released by the Central Statistics Office on Wednesday, 12 September, showed that retail inflation was at 3.69 percent in August compared to 4.17 percent in July.

A Bloomberg poll of 41 economists had estimated inflation at 3.77 percent for August 2018.

Inflation is currently running below the MPC’s forecast of 4.6 percent in the second quarter of the current financial year. The MPC has a mandate of maintaining inflation in a band of 4 (+/-2) percent.

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Inflation Internals

Inflation fell further as prices of vegetables and pulses fell sharply compared to last year. Higher inflation in the fuel and light category, however, balanced out the fall to some extent.

  • CPI food inflation stood at 0.29 percent in August compared to 1.37 percent in July.
  • Within the food basket, vegetable inflation fell to -7 percent from -2.19 percent in July.
  • Prices of pulses and products fell, with the inflation rate falling to -7.76 percent from -8.91 percent in July.
  • Fuel and light inflation stood at 8.47 percent in August up from 7.96 percent in July.

Fuel inflation readings continue to remain elevated because of the increase in global crude oil prices compared to last year. The central bank had earlier said that it expects crude oil to average $68 a barrel for the fiscal year 2018-19. Prices have stayed above that level. The weaker rupee and high taxes have added to the pain with prices of retail fuel products like petrol and diesel ruling at record highs.

Among the core inflation categories, housing inflation remained elevated at 7.59 percent in August 2018 from 8.45 percent in July 2018. Clothing and footwear inflation was at 4.88 percent in comparison to 5.67 percent in July 2018, while inflation in the households goods and services segment stood at 4.89 percent, from 5.18 percent in July 2018. Inflation in the transport and communication segment rose to near 6 percent from 6.18 percent in July 2018, showed the data.

(This story was originally published on BloombergQuint and has been republished in an arrangement)

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Topics:  Inflation 

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