NEW DELHI: Thanks to the vegetable rates easing from early September, led by tomato prices, which have started showing signs of correction on the back of increased supply, Consumer Price Index (CPI)-based inflation, better known as retail inflation, moderated to 6.83 per cent in August from a 15-month high of 7.44 per cent in July.

Headline consumer price inflation had surged to a 15-month high in July after staying below the 6 per cent upper tolerance band for the previous three months as consumers struggled to afford basic products causing much worry to the government.

According to data released by the National Statistical Office (NSO) showed that food inflation eased to 9.9 per cent in August from 11.5 per cent in July. Rural inflation was higher at 7 per cent while urban recorded 6.6 per cent. Inflation in vegetables slowed to 26.1 per cent in August from 37.4 per cent in the previous month.

Data showed that inflation in the vegetable basket eased to 26.14 per cent in August as against 37.4 per cent in July as prices of key perishable kitchen staples like tomato, beans, lemons, green chillies etc. have fallen substantially in the last few weeks, although prices of spices, cereals and pulses have risen. 

As per the data, the prices of oil and fats products also declined to 15.28 per cent in August while there was low inflation in fruits, meat, fish, eggs, sugar and confectionary, non-alcoholic beverages, and prepared meals and snacks on an annual basis.

Although at 6.83 per cent, the (CPI) inflation print for August is 61 basis points lower than July's 15-month high of 7.44 per cent, however despite slowing down, it continued to stay outside the tolerance band of the Reserve Bank of India (RBI) which has the mandate to ensure inflation remains at 4 per cent with a margin of 2 per cent on either side. 

The central bank's worry can also be attributed to the fact that at the current level, it was the fourth instance when the CPI has breached the RBI's upper limit of 2-6 per cent in 2023 and the seventh instance since July 2022. 

When determining the benchmark interest rate (repo rate), the RBI primarily considers retail inflation. For 2023–2024, the central bank expects CPI inflation to be 5.4 per cent.

On the other hand, India's index of industrial production (IIP) also showed a growth of 5.7 per cent in July from 3.8 per cent in June on the back of strong manufacturing activity in the country, especially in the mining and the electricity sectors. The July IIP growth of 5.7 per cent is above expectations of 5.0 per cent.