BS poll: Food price rise may bump up August retail inflation rate

India’s consumer price index (CPI)-based retail inflation rate is likely to have recorded an uptick in August to 2.18 per cent from an eight year low of 1.55 per cent in July, a Business Standard poll of nine economists show. 

 

Economists reckon that the uptick in retail inflation in August is on account of increase in food prices during the month as excess rains have affected crops along with the low base effect coming into play. Moreover, the rise in prices of certain services like personal care and high gold prices will shoot up the core inflation as well, thus leading to this rise.  

 

 

In August last year, the retail inflation rate stood at 3.65 per cent. 

 

The National Statistics Office (NSO) on Friday will release the August CPI data. In its last bimonthly policy review meeting on August 6, the Reserve Bank of India (RBI) had made a downward revision in its inflation projection for FY26 to 3.1 per cent from 3.7 per cent. While consumer prices rose an average 2.69 per cent in the first quarter of this fiscal year (Q1FY26), the RBI expects Q2 price rise to average 2.1 per cent, before rising to 3.1 per cent in Q3 and 4.4 per cent in Q4. 

 

 

Madan Sabnavis, chief economist at Bank of Baroda, said the retail inflation rate in August will shoot up as flooding in north, south and western parts have affected crops, particularly vegetable supplies.

 

“We expect the inflation print to come in at 2 per cent during August,” he added 

 

Echoing similar views, Abhishek Upadhyay, economist, ICICI Securities PD said that food prices which have drifted to the contractionary zone shall pick up in August, thus increasing the retail inflation to 2.1 per cent. The core inflation is also seen rising to 4.2 per cent as gold prices again rose and normalised higher over the month, which in any case had been normalising higher in any case except July. 

 

“In the case of food, high frequency data shows prices in higher weightage segments like cereals have started to rise. Vegetable prices are also rising although the rise here is not strong on a seasonally adjusted basis,” he added. 

 

Meanwhile, Madhavi Arora, chief economist, Emkay Global says that food deflation will likely continue even as the fall moderates on a year-on-year basis, while the personal care category likely continues to dominate sequential increase in core inflation. Nonetheless, the inflation undershoot versus RBI’s estimates would continue and FY26 inflation will likely undershoot RBI’s estimates by at least 50 basis points (bps).

 

“ Besides, the disinflationary bias may be increased further amid domestic goods and services tax (GST) rate cuts ahead. We assert the RBI's focus on 1-year ahead expected inflation appears increasingly misplaced in an evolving world – particularly as the global landscape continues to shift toward a disinflationary bias in Asia. Ahead, we think downside risks to growth would be increasingly evident with global resets and could open up space for easing in the rest of the year, even though the MPC seems to have raised the bar for further easing,” she added.

 

Paras Jasrai, associate director, India Ratings says that moderate inflation in Q2 may lead to another downward revision in CPI projection by the RBI in the upcoming October policy review.