Sequential retail price inflation marginally eases in Aug (Roundup)

New Delhi, Sep 14 (IANS) Lower food prices pulled down India’s August retail inflation to 6.69 per cent from 6.73 per cent in July, official data showed on Monday.

The data furnished by the National Statistical Office (NSO) showed that India’s consumer food price index during the month under review eased a bit to 9.05 per cent against 9.27 per cent reported for July 2020.

The CFPI readings measure changes in retail prices of food products.

“During the month of August 2020, NSO collected prices from 96.1 per cent villages and 96.4 per cent urban markets while the market-wise numbers of prices reported therein were 78.6 per cent for rural and 84.4 per cent for urban as compared to 87.9 per cent for rural and 93.9 per cent for urban in February 2020,” the NSO said.

“It may be seen that as various pandemic related restrictions were gradually lifted and non-essential activities started resuming operations, availability of price data has also improved.”

The data showed that CPI Urban rose to 6.80 per cent in August from 6.70 per cent in July. The CPI rural decreased to 6.66 per cent last month from 6.76 per cent in July.

The data assumes significance as the Reserve Bank of India, in its last monetary policy review, maintained the key lending rates on account of elevated retail inflation.

The Reserve Bank’s target for retail inflation is set within a band of +/-2 per cent.

As per the data, the CPI YoY inflation rate for vegetables and ‘pulses and products’ jumped by 11.41 per cent and 14.44 per cent, respectively, in August.

Furthermore, meat and fish prices rose 16.50 per cent and eggs became dearer by 10.11 per cent.

The prices of sugar and confectionery increased by 3.93 per cent.

In addition, the fuel and light category under the CPI rose by 3.10 per cent.

“August 2020 CPI inflation came in at 6.69 per cent (July 2020: 6.73 per cent, August 2019: 3.28 per cent). Base effect will have a favourable effect now onwards on CPI inflation till January 2021. Consumer food prices although declined sequentially, they remained high at 9.05 per cent.”

“Major contributors to food inflation have been pulses; egg; meat and fish; oils and fats; and vegetables. All these five commodities witnessed sharp increase in their inflation in September 2019 and base effect will provide some breather on inflation of these products. However, inflation of protein rich commodities such as pulses, egg, meat and fish etc. may remain firm due to people’s preference for these commodities to build immunity to fight Covid-19 pandemic.”

According to Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research: “The food inflation hasn’t shown much of a decline, staying put at 9.05 per cent and highlighting the continuing supply constraints in the economy.”

“There has only been a slight moderation in the YoY inflation of meat and fish (16.5 per cent) and pulses (14.4 per cent) while it has remained at the same levels for edible oils (12.4 per cent) and vegetables (11.4 per cent). Clearly, a double digit inflation in some of these key food categories before the festive season will remain a concern for the policy makers.”

In addition, ICRA Principal Economist Aditi Nayar said: “With the CPI inflation for August 2020 sticky at a sharp 6.7 per cent, and unlikely to recede meaningfully in September 2020, a repo cut in the upcoming policy review seems to be virtually ruled out. Moreover, the CPI inflation is expected to print sub-4 per cent only in December 2020-February 2021, based on which a continuation of the accommodative stance appears doubtful.”

–IANS

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