Retail Inflation 2021 In August Eases To A Four-Month Low. Know Why

Retail Inflation 2021: Prices of vegetables fell 11.68 percent from a year ago, while cereals fell 1.42 percent.

New Delhi: The lifting of foreclosure restrictions in several states in August helped lower retail price inflation to its lowest level in four months, as supply-side constraints were reduced, paving the way for economic recovery. Lower food prices should help the process of economic recovery.

What is the impact on consumer goods?

Inflation based on the Consumer Price Index (CPI) for August 2021 stood at 5.30%, down from 5.59% in July, according to data released Monday by the National Statistical Office ( NSO). In April, retail price inflation stood at 4.29%.

Consumer food price inflation (CFPI) in August stood at 3.11 percent from 3.96 percent in July.
In August, vegetable prices fell 11.68 percent from a year ago, while grain prices fell 1.42 percent. However, retail fuel and electricity prices rose 12.95 percent in August, and transportation costs rose 10.24 percent from a year ago, the data showed.

However, edible oil prices remained a concern with a 33% year-over-year increase. While the price of non-alcoholic drinks also increased by 13.85 percent.

What are RBI’s expectations?

Economists believe headline inflation has been moderated from expectations, in large part due to surprise lower food prices. “We expect subsequent readings to remain fairly benign and well below RBI estimates,” said Upasna Bhardwaj, an economist at Kotak Mahindra Bank.

Last week, RBI Governor Shaktikanta Das also hinted that inflation should moderate while remaining focused on growth during the pandemic, and be content to operate within the 2-6% limits and instead of a retail sales inflation target of 4%.

Aiming to return to the inflation target of 4%, the RBI said the timeline has yet to be decided. The cooling of prices will also help the RBI’s case to keep interest rates lower for longer to support economic growth.

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