Core services inflation eases to a nine-year low in FY24

Inflation

Core services inflation in the financial year 2023-24 eased to a nine-year low and core goods inflation to a four-year low, the Economic Survey for fiscal 2023-24 has said.

Core services inflation was at 3.8 percent in FY24 against 6.9 percent in FY19, and 5.3 percent in FY16. Similarly, core goods inflation fell to 4.9 percent in FY24, as compared to 7.3 percent in FY22, the pre-Budget document, released on July 22, said.

Core inflation in June stood at 3.1 percent, which was sharply lower than 7.1 percent in February 2022.

Core inflation is measured by excluding volatile food and energy items from CPI headline inflation.

Consequently, India was the only country amongst its peers to traverse a high-growth and low-inflation path in the period FY22 – FY24. This is despite the fact that there were pressures on the food inflation front, driven by adverse weather conditions, survey said.

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In FY24, the price situation improved. CPI inflation moderated, driven by a decline in core inflation -both goods and services, survey said.

In June, retail inflation rose to four-month high of 5.08 percent compared with 4.75 percent in the previous month as food inflation galloped to 9.4 percent given the impact of heatwave on vegetables.

Inflation had dipped to a 12-month low of 4.75 percent in the previous month, despite food inflation hovering around 8.7 percent.

From the pandemic-driven highs, inflationary pressures in India eased in FY22, aided by softening food inflation. However, core inflation had risen to 6 per cent at the same time, driven primarily by rising international commodity prices, survey said.

Core services inflation inched up in the year, but the increase was lower than that of core consumer goods, survey said.

Inflationary pressures firmed up in FY23 yet again driven by the Russia-Ukraine war disrupting the recouping supply chains leading to a rise in food and fuel prices. As economic activity gained momentum, core inflation also increased slightly and was primarily driven by core services inflation as house rents went up, with people returning to urban areas, survey added.