Inflation likely to decline till November: India Ratings and Research

New Delhi [India]: Inflation rates are expected to decline till at least November this year, said India Ratings and Research, a credit rating agency, on Monday.
Dr Sunil Kumar Sinha, Principal Economist, India Ratings and Research said that the retail inflation in August 2021 declined both sequentially and on a year-over-year basis to 5.30 per cent. The strong base effect resulted in the decline in retail inflation. It is the seventh consecutive month of retail inflation remaining in excess of 5 per cent and the 23rd consecutive month of retail inflation remaining in excess of RBI’s targeted inflation rate of 4 per cent.
“Although monsoon rainfall was lower in August 2021 it did not impact the cereals inflation adversely. On the contrary, cereals witnessed the seventh consecutive month of deflation. Low agriculture productivity and deflation in cereals prices may impact the rural income and in turn the rural demand. In fact, it is also finding a reflection in the low rural wage growth,” he emphasised.
The economist further said food price inflation declined to seven months low and was responsible for a 1.2 times decline in headline retail inflation. Non-food retail inflation increased to 6.75 per cent in August 2021 from 6.66 per cent in July 2021.
Dr Sinha stated that core inflation declined to a four-month low of 5.77 per cent in August 2021, suggesting improvement in the supply side. The supply chain had been broken or adversely impacted due to COVID related regional lockdowns in the month of April and May 2021.
“Inflation is expected to fall at least till November 2021 due to base effect and in the third quarter of FY22, it is expected to decline to closer to RBI’s targeted 4 per cent level. However, in the fourth quarter of FY22, it is expected to increase again. India Ratings and Research believe RBI will remain in pause mode for the rest of FY22,” he predicted.
Economist DK Mishra also anticipated the continuation of easing out of inflation.
Speaking to ANI, Mishra said, “Inflation has been a big concern for the country as a whole and RBI, in particular. It was causing a kind of tense atmosphere for the public. The COVID pandemic and increasing international crude oil prices had a cascading effect on manufacturing products and agriculture.”
“Inflation was touching the benchmark or the comfort zone of the RBI, which they have already fixed around 6 per cent. What we saw in the recent two months after this all July and August data analysis that the inflation has slightly eased off. That gives a kind of indication. It is due to the efforts made by the RBI in the monetary system. Prices of edible oil, some vegetable prices, cereals prices have come down. The monsoon is good. We hope that in times to come the inflation will be within the threshold or comfort zone of the RBI,” he stated.
Mishra said this positive note of easing off in this particular month gives a good indication that the prices will be well within the range and it will give relief to the public.
Retail inflation measured by the consumer price index (CPI) dropped to 5.30 per cent in August from 5.59 per cent in July, according to the Ministry of Statistics and Programme Implementation (MoSPI) data released on Thursday.
Food inflation fell to 3.11 per cent last month from 3.96 per cent in July, said the MoSPI statement.
Notably, this is the second consecutive month having the CPI data below 6 per cent. In the month of May and June, the CPI data was above the 6 per cent mark.

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