BENGALURU (Reuters) -India’s retail inflation fell in July to a near five-year low, as food prices eased from previous highs due to a base effect, government data showed on Monday.
Annual retail inflation was 3.54% in July, down from 5.08% in June. The latest print is the lowest since August 2019.
Economists polled by Reuters had forecast inflation at 3.65%, based on a higher print in July last year when inflation hit a 15-month peak of 7.44%.
COMMENTARY:
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“The bottom for core inflation is probably behind us and we see a move above 4% over the coming months. For headline inflation, the monsoon progress in the coming weeks will be crucial to determine whether food inflation shocks subside.”
“This print needs to be seen with some caveats (base effect impact, etc) and does not necessarily indicate we are out of the woods yet on inflation.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“This month’s headline likely marks the bottom for the headline and core prints, but July’s print increases the likelihood that the central bank’s quarterly forecast (for the headline) at 4.4% might be undershot.”
“The pullback was well-telegraphed, with the authorities signalling that the fall in July-August would be seen through, given its transient and temporary nature.”
SWATI ARORA, ECONOMIST, HDFC BANK, MUMBAI
“A favourable base from last year largely pulled down the headline inflation below 4% in July. A lower annualised food inflation was also due to a high base from last year. On a sequential basis, food momentum continued to remain high largely due to high vegetable and pulses prices.”
“Looking ahead, we expect core inflation to rise back above 4% from September onwards as support from favourable base wanes and due to an improvement in demand conditions.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“High base effect helped to contain headline inflation number for July despite rise in food prices and impact of higher telecom tariffs.”
“The headline inflation numbers are expected to remain benign this quarter amid high base effect. We continue to see headline CPI at 4.5% average this fiscal, with likelihood of first rate cut in Q4 FY25.”
ADITI NAYAR, CHIEF ECONOMIST AND HEAD – RESEARCH AND OUTREACH, ICRA LTD, NEW DELHI
“The uptick in the core inflation was partly led by the telecom tariff hikes. We expect firming domestic demand to seep into services inflation, pushing up the core-CPI inflation over the course of the year.”
DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM
“July retail inflation decline was on expected lines; however, the extent of decline was faster than the expectations. Continued deflation in fuel and light also helped in inflation decline in July 2024.”
“The cereals inflation has remained more than 8%, which is a concern for both government as well as RBI. The favourable base effect on vegetable inflation will remain only till August and post that it will turn unfavourable. Kharif sowing is favourable for pulses and paddy. However, it will give results only post- harvest, October 2024 onwards.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“We continue to maintain that RBI will be on a status quo mode on rates for the October policy with likely shift in stance then.”
“Scope for a shallow rate easing cycle could open from December but much will be data dependent both in India and the U.S.”
VIVEK RATHI, NATIONAL DIRECTOR – RESEARCH, KNIGHT FRANK INDIA, MUMBAI
“The inflation expectation as witnessed in the RBI household inflation expectation survey indicates higher level of price pressures amongst the households.”
“Thus, while the July data indicates softening of consumer inflation, the accumulated prices over the last many months could potentially soften the consumption potential of the households.”
YUVIKA SINGHAL, ECONOMIST, QUANTECO RESEARCH, NEW DELHI
“The benign inflation outcome … masks the continued stubbornness in food prices owing to vegetables, as well as the onset of upward revision in telecom CPI index following the tariff hikes by key telecom companies.”
“Looking ahead, the recovery in monsoon activity in August along with improvement in spatial distribution augurs well for Kharif sowing and output. Having said that, food inflation trajectory will remain on close watch given its dominance on headline inflation, even as fuel and core inflation remain comforting.”
(Reporting by Siddhi Nayak and Nishit Navin in Mumbai; Editing by Devika Syamnath)
