Cooling food takes inflation below RBI range to 8-year low

Fall season Inflation is now below the central bank's target range of 2-6%.

- Rhik Kundu

India's retail inflation fell to its slowest pace in eight years in July as food prices cooled, staying below the central bank target for the fifth month in a row. While the decline helps the central bank maintain a growth-supportive monetary policy, it also points to the potential for lower farm incomes, given the steady fall in food prices.

The Consumer Price Index (CPI) rose just 1.55% annually in July, slipping below the lower end of the Reserve Bank of India's 2-4% target range, in the weakest increase since June 2017. The fall was led by food prices that dipped 1.76%, their biggest decline since at least January 2019, as strong monsoon rains boosted farm output. Economists polled by Mint had estimated July inflation at 1.4%.

Going ahead, economists expect food inflation to stay subdued. Strong monsoon progress, ample reservoir levels, and robust kharif sowing point to steady agricultural output and price stability, though they cautioned that close tracking of the monsoon's spread and timing remains key.