Marking the lowest level in nearly five years, India's year-on-year inflation rate, based on the All-India Consumer Price Index (CPI), sharply declined to 3.54% in July 2024, according to the latest data from the Ministry of Statistics & Programme Implementation. Rural inflation stood at 4.10%, while urban areas recorded an inflation rate of 2.98%.
Final data for June shows an annual retail inflation rate of 5.08%. However, provisional figures for July indicate a significant drop to 3.54%, compared to 7.44% in July last year. Food inflation in July 2024 dropped to 5.42%, its lowest level since June 2023, down sharply from 11.51% a year ago and 9.36% in June. Rural and urban areas recorded corresponding inflation rates of 5.89% and 4.63%, respectively. Significant declines were observed in the prices of vegetables, fruits, and spices across all groups during the month.
In July 2024, inflation in the food and beverages basket stood at 5.06%, down from 8.36% in June but still higher than the overall headline inflation rate. Pulses saw the highest inflation at 14.77%, followed by cereals at 8.14%, vegetables at 6.83%, eggs at 6.76%, and meat and fish at 5.97%.
“The CPI inflation came in higher than our expectations but broadly comfortable and most likely lower than the estimates inferred from RBI’s upward revised Q2 figures,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank. “Scope for a shallow rate easing cycle could open from December but much will be data dependent both in India and the US,” she added.
Analysts attribute the lower inflation to the statistical impact of a higher base and falling vegetable inflation.
“CPI inflation has come at 3.54% versus 3.70% expectations for July 2024. This is due to vegetable inflation falling and high base effect as last year CPI inflation was above 7% level,” said Murthy Nagarajan, Head-Fixed Income, Tata Asset Management. “This will be taken as positive by the markets, but we also have the US CPI data coming in the next 2 days. This data may continue the positive momentum in the debt market,” he added.
Headline inflation was highest in Bihar at 5.87%, followed by Assam at 5.11%, while Jharkhand recorded the lowest rate at 1.72%.
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