India’s retail inflation falls to 3.5% in July, marking a significant drop after a rise in the previous month. According to recent data released by the government, the inflation rate eased to 3.54% on an annual basis, slipping below the Reserve Bank of India’s (RBI) medium-term target of 4% for the first time since August 2019. This decline comes after June’s inflation rate saw a rise to 5.08%, driven by higher food prices.
The moderation in retail inflation was partly due to a high base effect from the previous year. In July 2023, inflation had peaked at 7.44%, contributing to the notable decrease in the current rate.
Rural inflation also fell significantly, decreasing to 4.10% from 5.66% in June and 7.63% in July 2023. Urban inflation similarly eased to 2.98% from 4.39% the previous month. Food inflation, which holds a 50% weight in the inflation basket, moderated to 5.42% in July compared to 9.36% in June.
Despite this easing, the RBI’s plans to cut interest rates might be influenced by the ongoing volatility in inflation trends. The recent drop in inflation indicates a temporary relief, though future inflationary pressures remain a concern.
