NEW DELHI- India’s retail inflation eased in August as food prices moderated, but remained above the upper end of the central bank’s target band for a second consecutive month, keeping policymakers watchful.
Annual Retail inflation in August was 6.83 percent , compared with 7.44 percent in July – a 15-month high – according to data released by the ministry of statistics on Tuesday.
The August print was lower than the 7 percent estimate of 45 economists polled by Reuters.
Food inflation, which accounts for nearly half of the overall basket, was up 9.94 percent in August compared with a rise of 11.51 percent in July.
“Offering a modicum of relief, the CPI inflation eased below the 7 percent mark … largely led by vegetables, amidst some moderation in the prints for clothing and footwear, housing and miscellaneous items as well,” said Aditi Nayar, economist at ICRA.
Food prices have been a key concern for policymakers since last year as erratic weather conditions have hurt the output of vegetables, milk and cereals.
Inflation has been above the central bank’s 2 percent -6 percent target band for seven months out of the last 12.
Earlier this month, Reserve Bank of India (RBI) Governor Shaktikanta Das said India’s monetary policy committee would remain watchful of the evolving inflation situation, but the recent spikes in vegetable prices would start to ebb.
Vegetable inflation eased to 26.14 percent in August from 37.34 percent in the previous month. Cereal inflation in August eased to 11.85 percent from 13.04 percent in July.
In its efforts to rein in domestic inflation, India’s government banned exports of non-basmati white rice last month and imposed a 20 percent duty on exports of parboiled rice, while imposing a 40 percent tax on onion exports. It has banned exports of wheat since last year.
Inflation is expected to remain elevated in the coming months as a weak monsoon, lower reservoir levels and rising crude prices are likely to keep the pressure on food prices.
“Upward pressure on food inflation persists with nearly 60 percent of the food and beverages subcomponents by weight seeing 6 percent plus inflation in August,” said Gaura Sen Gupta, economist at IDFC First Bank Economics Research.
