The fall offers the Reserve Bank of India (RBI) greater scope to consider further interest rate cuts, even as it delivers a mixed impact bringing relief to consumers but hurting farm incomes
India’s annual retail inflation dropped sharply in July to its lowest level in more than eight years, driven by a sustained decline in food prices, including vegetables and pulses.
The fall offers the Reserve Bank of India (RBI) greater scope to consider further interest rate cuts, even as it delivers a mixed impact bringing relief to consumers but hurting farm incomes.
According to official data, the Consumer Price Index (CPI) rose just 1.55 per cent in July, down from 2.10 per cent in June and well below the central bank’s target range of 2 to 6 per cent.
This is the lowest reading since June 2017. Under its mandate, the RBI must ensure inflation remains within the prescribed band for no more than three consecutive quarters.
The central bank has already revised down its inflation forecast for the current financial year, cutting it to 3.1 per cent from the earlier 3.7 per cent, citing a consistent easing trend.
Food prices have been the primary driver of the decline, with the food index falling 1.76 per cent in July compared to a revised 1.01 per cent drop in June. Vegetable prices slumped 20.69 per cent year-on-year, deepening from a 19 per cent fall in the previous month, while pulses prices tumbled 13.76 per cent after a 12 per cent decline in June.
While the trend is likely to be welcomed by consumers and policymakers, economists caution that prolonged deflation in food prices could dampen rural incomes and spending, potentially weighing on economic growth.
