Retail inflation dips to 5.3 per cent in August due to fall in prices of cereals, vegetables

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India’s retail inflation fell to a four-month low of 5.3 per cent in August from 5.59 per cent in the previous month, due to lower food prices and a higher base effect. According to data released by the Ministry of Statistics and Program Implementation on Monday, inflation based on the Consumer Price Index (CPI) remained within the RBI’s tolerance band for the second consecutive month.

While consumer price index (CPI)-based retail inflation declined to 5.3 per cent in August from 6.69 per cent in the same month a year ago, food inflation declined at a much faster pace to 3.11 per cent from 9.05 per cent in August 2020. Food inflation was less than 3.96 per cent in the previous month of July. Retail inflation, which rose sharply to 6.3 per cent in May from 4.23 per cent in April, has been on a downward trend since then. It was 6.26 per cent in June and 5.59 per cent in July this year.

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The Reserve Bank of India, which primarily takes into account retail inflation to decide monetary policy every two months, has been tasked by the government to keep it at 4 per cent, with a tolerance band of 2 per cent on either side. Inflation in ‘vegetables’ and ‘cereals and products’ declined by 11.68 per cent and 1.42 per cent, respectively, according to data released by the National Statistics Office on Monday.

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