Retail, Wholesale Inflation Rise in August Amid Elevated Energy Prices, Costlier Food Items

New Delhi: Retail inflation rose to 4.82 per cent in August, driven by costly onions and other food items, a trend the RBI will have to factor in when its rate-setting panel meets early next month.

Also, wholesale price-based inflation increased to 9.92 per cent in August from 9.78 per cent in July, official data released on Monday showed.

While the latest Consumer Price Index (CPI) print remains within the central bank’s tolerance band, pressure on energy prices amid the ongoing West Asia conflict poses challenges for policymakers on the inflation front.

A higher CPI reading will be a key factor in policy rate decisions when the RBI’s Monetary Policy Committee (MPC) meets during October 5-7. The RBI’s rate-setting panel left the key interest rate unchanged last month amid inflation concerns.

The CPI-based retail inflation was 4.45 per cent in July. August inflation numbers are the highest since the new series, with base year 2024, took effect in January.

According to National Statistics Office (NSO) data on CPI for August, retail inflation for rural and urban were 5.23 per cent and 4.31 per cent, respectively.

Retail food inflation in August climbed to 5.95 per cent from 5.52 in the preceding month.

Inflation in onions rose to 48.27 per cent in August against 22.54 per cent in July.

Inflation in garlic rose to 43.6 per cent from 35.36 per cent in July. The rate of price rise in ginger was also high at 73.82 per cent compared to July.

On the other hand, there was a contraction in prices of tomato, potato, lady finger, and parwal.

The highest retail inflation was recorded in Telangana at 6.27 per cent and the lowest in Mizoram at 2.35 per cent.

Reserve Bank governor-headed MPC, which factors in retail inflation for arriving at the key interest rate (repo), is scheduled to meet on October 5 to 7.

After August MPC meeting, the Reserve Bank of India had kept key short-term policy rates unchanged amid inflation worries. It had projected the CPI inflation for 2026-27 at 5 per cent, with Q2 at 4.7 per cent, Q3 at 5.9 per cent, and Q4 at 5.5 per cent.

The government has mandated the RBI to ensure CPI-based inflation remains at 4 per cent, with a margin of 2 per cent on either side.

The wholesale price inflation print is the second-highest in the new WPI series, with 2022-23 as the base year.

In August, wholesale food inflation rose to 7.05 per cent from 6.65 per cent in July. In manufactured items, WPI inflation stood at a series high of 8.37 per cent compared to 8.29 per cent in July.

In the fuel and power basket, WPI-based inflation was 22.93 per cent in August against 20.05 per cent in July.

Last week, an SBI research report said that the RBI should raise the benchmark interest rate by 25 basis points in October and again in December as a countermeasure to persistent external shocks, elevated crude oil prices and signs of broader inflationary pressures.

Commenting on the inflation data, Dharmakirti Joshi, Chief Economist, Crisil said elevated energy prices invariably find their way into the broader cost structure of the economy.

More fundamentally, the macroeconomic backdrop is changing, he said, and added strong growth has sustained demand, while renewed conflict in West Asia is adding fresh pressure on input costs.

“Together, these forces are reducing the latitude for monetary policy to remain on the sidelines. The window for a prolonged wait-and-watch approach appears to be narrowing, and we expect the next phase of policy tightening to commence soon,” Joshi opined.

Rajeev Sharan, Head of Research, Brickwork Ratings said wholesale inflation at 9.92 per cent runs well above retail, but this gap largely reflects producer-level fuel and metals pressures that are not fully reaching consumers, given that CPI is services-heavy and retail fuel prices remain cushioned.

“Going forward, we expect headline inflation to stay range-bound near 4.5-5 per cent, with food the key swing factor amid uneven monsoon and El Niño-related uncertainty,” he said.

The main risk is that high wholesale food and input costs eventually push up retail prices, alongside any rise in crude oil or fresh volatility in vegetable prices, Sharan added.

(Disclaimer: Except for the headline, this article has not been edited by HDFC Sky editorial team and is auto-generated from PTI feed.)