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India's CPI inflation dropped to 3.54% in July 2024, the lowest in 59 months. Rural inflation was higher at 4.10%, while urban areas saw 2.98%. Food inflation eased to 5.42%. This may influence RBI's future monetary policy.
India's Consumer Price Index (CPI) inflation for July 2024 eased significantly to 3.54%, marking the lowest level in 59 months, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI).
This sharp decline in retail inflation comes as a welcome relief, especially for the Reserve Bank of India (RBI), which aims to keep inflation within the 4% target, with a permissible range of 2-6%.
The provisional inflation data reveals a disparity between rural and urban areas. While the overall CPI inflation stands at 3.54%, rural regions experienced a higher inflation rate of 4.10%, compared to just 2.98% in urban areas. This suggests that price pressures remain more intense in rural India, despite the overall easing trend.
The All India Consumer Food Price Index (CFPI) also showed a decrease in food inflation, which reached its lowest level since June 2023. The YoY food inflation rate for July 2024 is provisionally recorded at 5.42%, with rural areas again facing higher inflation at 5.89%, compared to 4.63% in urban regions.
This decline in food prices is attributed to significant reductions in the prices of vegetables, fruits, and spices.
The recent drop in inflation is aligned with the RBI's expectations, as indicated in its monetary policy review last week. The central bank had anticipated some relief in food inflation due to favourable monsoon conditions and sufficient buffer stocks of cereals.
RBI Governor Shaktikanta Das had projected CPI inflation for 2024-25 at 4.5%, with specific quarterly estimates ranging between 4.3% and 4.7%.
The easing inflation figures may prompt the RBI-led Monetary Policy Committee (MPC) to consider an early rate cut in their upcoming meetings, providing further relief to the economy.
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