Retail inflation at eight-month low of 3.78%

The consumer price index (CPI)-based inflation declined to an eight-month low of 3.78 per cent in July from nine-month high of 5.4 per cent in June as the rate of price rise declined sharply in food items, raising hopes of the Reserve Bank of India (RBI) cutting the policy rate before or in the September monetary review.

But, pulses continued to witness elevated inflation at over 20 per cent in July. Before this, CPI inflation was lower at 3.4 per cent in November, 2014. The inflation stood at 7.39 per cent in July, 2014.

Food inflation more than halved to 2.15 per cent in July from 5.48 per cent in the previous month. It should be noted that food items have a weight of more than 45 per cent in CPI inflation and hence, is the single-most factor of movement in the headline number.

What is interesting is that the food inflation was just 1.01 per cent in the month of July in the urban areas, while it was a bit higher at 2.83 per cent in rural areas. The situation was exactly the opposite in June when the rate of price rise in food items was higher at 5.61 percent in villages than 5.61 per cent in the previous month.