CPI inflation up marginally to 3.65% in August, second lowest in the last five years

India’s consumer price index (CPI) inflation in August 2024 stood at 3.65 percent compared with 6.83 percent a year ago, according to official data released on September 12. This is the second lowest CPI figures in the last five years. 

“Year-on-year inflation rate (3.65 percent) based on All India Consumer Price Index (CPI) for the month of August, 2024, is second lowest in the last five years. Corresponding inflation rates for rural and urban are 4.16 percent and 3.14 percent, respectively,” the Ministry of Statistics & Programme Implementation said in a statement. 

The food price inflation for August was marginally higher at 5.66 percent compared to 5.42 percent in July. India’s retail inflation in July stood at 3.6 percent. As per the data, the CPI food price index was down 0.4 percent on month-on-month (MoM) basis, while the CPI vegetable index down 2.5 percent on MoM basis.

According to the latest data released by the National Statistical Office (NSO), inflation in the food basket eased to 5.89 percent in August 2024, compared with 9.94 percent a year ago.  

Food inflation for August 2024 is the second lowest since June 2023. Year-on-year inflation rate based on The All-India Consumer Food Price Index (CFPI) number for August 2024 is 5.66 percent (provisional). Corresponding inflation rate for rural and urban is 6.02 percent and 4.99 percent, respectively, according to the official data. 

At item level, ‘tomato’ has exhibited the lowest year on year inflation (-47.91 percent) as well as lowest MoM change in index (-28.8 percent), the report added. Decline in inflation is observed in the subgroups of ‘spices’, ‘meat and fish’ and ‘pulses and products’ etc, the ministry said said.

CPI inflation in July had eased to a 59-month low of 3.54 percent in July from 7.44 percent in July 2023 and 5.08 percent in June 2024. Consumer food price inflation also cooled to 5.42 percent in July as against 11.51 percent a year ago and 9.36 percent in June 2024. This easing was seen to be partly due to the impact of a higher base in July 2023. Retail inflation in vegetables was at 6.83 percent in July. 

The RBI's inflation projection for FY25 is 4.5%, with 4.4% for Q2, 4.7% for Q3, 4.3% for Q4, and 4.4% for Q1FY26.

“The CPI inflation unexpectedly inched up to 3.7% in August 2024 from 3.6% in July 2024, in contrast with our forecast of an easing, largely led by the food and beverages segment. With the base effect normalising, we anticipate a sharp pickup in the CPI inflation to 4.8% in September 2024, and range between 4.4% and 4.7% in H2 FY2025," Aditi Nayar, Chief Economist and head of Research and Outreach at ICRA Ltd, said.

Notwithstanding the anticipated hardening in September 2024, the average CPI inflation will undershoot the MPC’s Q2 FY2025 estimate of 4.6 percent. With the Q1 FY2025 GDP growth print (+6.7 percent), having undershot the MPC’s forecast for the quarter (+7.1 percent), a change in stance in the October 2024 policy meeting can't be entirely ruled out, Nayar added.

IIP grows 4.8% in July

The country’s manufacturing sector registered growth for July, according to official data released on September 12. The Ministry of Statistics & Programme Implementation’s (MoSPI) Index of Industrial Production (IIP) stood at 4.2 percent for June compared to 4 percent growth rate in June 2023. India’s IIP growth rate has increased by 0.5 percent to 5.2 percent for the financial year 2024-25 compared to 4.7 percent in the previous year. The increase in growth was led by acceleration in manufacturing (4.6 percent) during July.  

The manufacturing and electricity sector rose by 2.6 percent and 8.6 percent, respectively, year-on-year in June 2024 compared to the same period the previous year, according to the data. The mining sector fueled the IIP growth in June 2024. 

The production of basic metals grew by 6.4 percent, while the manufacture of coke and refined petroleum products saw a 6.9 percent increase. The standout performer was the manufacture of electrical equipment, which surged by 28.3 percent, making it the top contributor to the sector's overall growth. 

Aditi Nayar, Chief Economist and head of Research and Outreach at ICRA Ltd, said, “The YoY growth in the IIP inched up slightly to 4.8 percent in July 2024 from the revised print of 4.7 percent in June 2024, led by the manufacturing sector, even as growth in mining output and electricity generation decelerated between these months. Interestingly, four of the six use-based segments, excluding capital and intermediate goods, witnessed a deterioration in their performance in July 2024 vis-à-vis June 2024, signalling that economic activity remains fairly uneven.” 

ICRA anticipates the YoY growth in the IIP to ease to sub-3.0 percent in August 2024, amid the contraction in electricity and mining output owing to excess rains, as well as an adverse base (+10.9 percent in August 2023 vs 6.2 percent in July 2023), Nayar added.