Monsoon progress and seasonal variations are expected to stabilise inflation rates
Retail inflation in India is projected to remain below or close to 5 per cent for most of the remaining months of 2024-25, except for September, according to a report from The Economic Times. The report, authored by Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India (SBI), highlights that the satisfactory progress of the monsoon and balanced seasonal variations are key factors stabilising the inflation outlook.
India’s retail inflation, measured by the Consumer Price Index (CPI), rose in June, reversing the previous trend of moderation due to increasing food prices. The year-on-year inflation rate for June 2024 was provisionally recorded at 5.08 per cent. The corresponding rates for rural and urban areas were 5.66 per cent and 4.39 per cent, respectively.
In June, 12 states in India experienced inflation rates exceeding the national average of 5.1 per cent, with Odisha having the highest rate at 7.22 per cent, followed by Bihar at 6.37 per cent and Karnataka at 5.98 per cent.
Meanwhile, US inflation declined by 0.1 per cent from May, bringing the 12-month rate to 3 per cent, its lowest level in over three years. This has raised expectations of a potential Federal Reserve rate cut by September, as noted in the report. “We, therefore, feel the RBI will revisit the policy stance around that time in line with our expectations,” the SBI Research report added.
Despite the overall positive outlook, rising food prices remain a concern for Indian consumers, with food inflation nearly doubling year-on-year in June. Food inflation surged to 8.36 per cent last month, compared to 4.63 per cent in June 2023.
