Retail inflation drops to 5-year low of 3.54% in July, dips below RBI’s 4% target

PTC News Desk: Retail inflation in India fell to its lowest level in almost five years in July 2024, according to data from the All India Consumer Price Index (CPI) released on Monday, August 12, 2024. The combined inflation rate, which includes both rural and urban areas, dropped to 3.54% in July 2024, a significant decline from 7.44% recorded in July 2023.

This marks the first time in nearly five years that overall retail inflation has fallen below the Reserve Bank of India’s (RBI) 4% inflation target, signaling a substantial improvement in the inflationary landscape.

Urban and Rural Inflation Rates

The urban inflation rate saw a marked decrease, falling to 2.98% in July 2024 from 7.20% in July 2023. Similarly, rural inflation also saw a significant decline, dropping to 4.10% in July 2024, compared to 7.63% in the same period last year. These reductions indicate broad-based relief from inflationary pressures across both urban and rural regions.

Food Inflation Sees Historic Low

Food inflation in July 2024 also reached its lowest level since June 2023. The combined Consumer Food Price Index (CFPI), which measures food inflation, experienced a sharp decrease, falling to 5.42% in July 2024 from 11.51% in July 2023. This decline in food inflation contributed significantly to the overall reduction in retail inflation.

Items with Lowest and Highest Inflation Rates

Among the various food items, spices experienced the lowest inflation rate, registering a decrease of -1.43%. Oils and fats followed closely with a -1.17% inflation rate. Non-alcoholic beverages, however, saw a slight increase in prices, with a 2.29% inflation rate.

On the other hand, pulses experienced the highest inflation, with prices increasing by 14.77% year-on-year. Cereals followed with an 8.14% inflation rate, while vegetables saw a 6.83% increase in prices.

Urban and Rural Food Inflation

Urban areas witnessed a significant drop in food inflation, with rates falling to 4.63% in July 2024 from 12.37% in July 2023. Rural food inflation also saw a decline, dropping to 5.89% from 11.04% in the same period last year. These reductions in food inflation across both urban and rural areas played a crucial role in the overall easing of retail inflation.

State-Wise Inflation

Among the 22 states and union territories listed in the CPI report, Bihar recorded the highest combined inflation rate at 5.87%. Assam followed with a 5.11% inflation rate, and Uttar Pradesh recorded 4.57%.

Conversely, Jharkhand reported the lowest combined inflation rate at 1.72%, followed by Delhi at 2.06%, Chhattisgarh at 2.16%, and Rajasthan at 2.53%. These figures highlight the varying inflationary pressures across different regions of India.

The significant decline in retail inflation, coupled with the decrease in food inflation, provides a promising outlook for the Indian economy, offering relief to consumers and aligning with the Reserve Bank of India’s inflation targets.

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