India's inflation higher than peers; global prices hit a two-year low

Downward pressure on food as global prices hit a two-year low

India’s peers among the largest economies in the world have broadly been seeing a declining trend in inflation in recent months.

Germany, UK, and the US have seen inflation decline significantly, compared to the same period last year. India has seen a more limited decline. The recent uptick puts it closer to the inflation numbers seen in other countries in the Brics emerging market peer group, though India’s numbers are higher. India’s latest inflation number remains higher than the latest figure available for the top five developed countries in terms of economic size, as well as its Brics peers (charts 1,2).

 

 

India’s inflation rate dipped to 6.83 per cent in August, from 7.44 per cent in July. Disruptions in monsoon, coupled with crop damage had pushed up vegetable prices in July. The government had announced a reduction in domestic liquefied petroleum gas prices as a measure to deal with the rising prices, and export bans to control food prices.

Globally food prices dropped to their lowest levels in two years in August as per the latest iteration of the UN’s Food and Agriculture Organisation (FAO) Food Price Index. The FAO’s rice index rose to a 15-year high largely due to India’s export restrictions on rice.

A state-wise comparison of inflation rates shows that the price rise has been higher in 13 states compared to the India average (chart 3).