India’s retail inflation drops to 3.54% in July, marking 5-year low

India’s retail inflation dropped to 3.54 per cent in July 2024, falling below the target set by the Reserve Bank of India (RBI) for the first time in five years.

The five-year low is mainly owing to moderation in food price rise, which dipped from 9.4 per cent in June to 5.4 per cent in July, according to data released by the Ministry of Statistics and Programme Implementation.

India’s inflation has stayed below the 6 per cent mark since September 2023, with the government having entrusted the RBI responsibility of maintaining an inflation rate of around 4 per cent. Retail inflation last fell below the RBI’s inflation target of 4 per cent in September 2019. The rate had dropped to 3.99 per cent back then.

The ministry data shows that urban inflation has dropped from 4.4 per cent in June 2024 to below 3 per cent in July. Rural inflation on the other hand fell from 5.7 per cent in June to 4.1 per cent in July this year.

July food inflation, incidentally, was higher in rural areas at 5.9 per cent, compared to 4.6 per cent in urban India. Comparatively, rural India fared better in June 2024. While rural food inflation stood at 9.15 per cent in June, urban food expenses surged by 9.6 per cent.

A major reason for the drop in consumer price-based inflation is also base effects from July 2023, when food index had surged by 11.5 per cent and retail inflation stood at 7.44 per cent. Retail inflation based on Consumer Price Index (CPI) was 5.08 per cent in June 2024.

Data from the National Statistical Office (NSO) shows that price of the vegetable basket rose at the rate of 6.83 per cent while prices of cereals and products rose at 8.14 per cent. Annual inflation of milk and milk products was 2.99 per cent. The CPI Inflation in the food basket was 5.42 per cent in July 2024, down from 11.51 per cent a year ago and 9.36 per cent in June.

Bihar was the state with the highest inflation at 5.87 per cent while Jharkhand had the lowest inflation at 1.72 per cent. At 4.1 per cent, inflation was more in rural India than the national average, according to the NSO report. The figure stood at 2.98 per cent in urban India.

July marked relief in global food prices, too, after the surges since March this year.