Inflation hits nine-month low due to cheaper food

New Delhi: India’s retail inflation rate eased to nine month low of 4.17 per cent in July due to slow down in prices of vegetables and fruits.

Retail inflation was at 4.92 per cent in June. Retail inflation is based on  Consumer Price Index (CPI).

As per  the Central Statistics Office (CSO) data inflation in vegetables contracted by 2.19 per cent last month, compared to 7.8 per cent in June. The rate of price rise in fruits slowed down 6.98 per cent, as against over 10 per cent in the previous month. As per the data, the inflation in protein rich items like meat and  fish, and also milk was also slower in July compared to the previous month.

However, inflation in the 'fuel and light' segment based on the changes in the CPI increased to 7.96 per cent from 7.14 in the previous month.

“Decline in retail inflation in July 2018 was on expected lines. Unfavourable base effect of June 2017 (1.46 per cent) turned favourable in July. Inflation numbers from July 2017 till June 2018 had adverse base effect due to GST, which had led to inflation increasing at a faster pace,” said Dr Devendra Pant, chief economist at Ind-Ra.

He said that internally, food inflation moderated to 10 months low and expected to behave at this pace for next two months before impact of revision of kharif MSP starts impacting inflation. "High  fuel prices have led to continuous increase in inflation of fuel and light, and transport and communication group. Going forward these commodity groups are expected to exert pressure on retail inflation,” said Dr Pant.

He said that core (non-food, non-fuel and non-transport and communication) inflation moderated to  four months low at 5.70 per cent. However, this is still higher than the core-core inflation observed during March 2016 to March 2018, suggesting demand pressure in the economy.