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CPI inflation in August cools further to 5.30%

Consumer Food Price Inflation (CFPI) for August stood at 3.11 percent compared to 3.96 percent in July.

September 13, 2021 / 06:22 PM IST

Consumer Price Index-based Inflation (CPI) for August 2021 came in at 5.30 percent, compared with 5.59 percent in July, as food prices cooled further, especially in the case of vegetable inflation, data released by the National Statistical Office (NSO) showed on September 13.

Consumer Food Price Inflation (CFPI) for August stood at 3.11 percent compared to 3.96 percent in July.

However, concerns remained with high edible oil prices, which registered an increase of 33 percent year-on-year (YoY).

"The welcome decline in the CPI inflation in August 2021 was broad-based, led by all the components except clothing and footwear, and fuel and power. Contrary to our apprehension, the CPI inflation receded appreciably, led by lower than expected food inflation," said Aditi Nayar, Chief Economist, Icra Ltd.

CPI for July had come back within the Monetary Policy Committee's inflation targeting range of 4 (+/-2) percent, after two months of being above 6 percent.


It was 6.30 percent in May, as food prices had hardened, and transportation costs rose due to higher petrol and diesel prices and localised lockdowns. Headline retail inflation had cooled slightly to 6.26 percent in June.

Food inflation comes as a relief

The cooling of food & beverages inflation was the chief driver behind the moderation in the CPI inflation to a four month low in August, Nayar said.

"In month-on-month terms, the food & beverages basket remained flat, with downticks in eggs, meat and fish, fruits, pulses and cereals, absorbing the upticks in milk, oils and fats, vegetables, sugar and spices," she said.

As per Nayar, core-CPI inflation eased to 5.5 percent in August from 5.7 percent in July

“Core remains high and sticky. Core inflation may remain under pressure amid lagging impact of passing on of high global commodities and margin pressures," said Madhavi Arora, Lead Economist at Emkay Global.

Arora said that the headline CPI may average almost 60 basis points lower than the RBI’s forecast of 5.7 percent.

"With the monetary reaction function currently hinging more on growth revival becoming sustainable, the RBI is unlikely to change key policy rates this year and the focus will be more on surplus liquidity management," Arora said.

"At present, we believe policy normalisation could commence in February 2022, with a change in the stance of monetary policy to neutral from accommodative, followed by a hike in the repo rate of 25 bps each in the April 2022 and June 2022 meetings," said Nayar.


Arup Roychoudhury

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