NEW DELHI: India’s retail inflation rose to an eight month high of 4.8% in August, compared with 4.5% in July, mainly due to a rise in food prices, according to data released by the National Statistics Office (NSO) on Monday.
The latest reading marks the third consecutive month in which consumer price inflation has remained above the Reserve Bank of India’s (RBI) medium term target of 4%. However, it continues to stay within the central bank’s broader tolerance band of 2% to 6%.
Separately, wholesale price inflation also increased marginally, with the Wholesale Price Index (WPI) based inflation rising to 9.9% in August from 9.8% in July. The increase was attributed to higher prices of fuel and manufactured products.
Food inflation accelerated to 6% during August from 5.5% in the previous month, emerging as a key factor behind the increase in overall consumer prices.
The recent escalation of hostilities in West Asia, which has pushed up global oil prices, also had an impact on several service sectors. Inflation in restaurant services rose to 8.4% in August from 7.7% in July, while transport services inflation increased to 4.6% from 4.4%.
Price pressures were more pronounced in rural areas, where inflation climbed to 5.2% in August from 4.8% a month earlier. Urban inflation also increased, reaching 4.3% compared with 4% in July.
The latest inflation figures are significant ahead of the RBI’s Monetary Policy Committee (MPC) meeting scheduled for early October, as policymakers assess the impact of domestic and international factors on price stability.
CareEdge Chief Economist Rajni Sinha said the inflation outlook remained exposed to external as well as weather related risks. She pointed to uncertainty over transit through the Strait of Hormuz as a potential source of upward pressure on global energy prices, while below-normal rainfall remained a concern domestically.
Sinha said a sustained increase in inflation could strengthen the case for a rate hike in the coming months, making the October RBI policy review particularly important.
ICRA Chief Economist Aditi Nayar had earlier projected a rate increase in December. However, she noted that if crude oil prices remain elevated ahead of the next MPC meeting and signal a possible increase in retail petrol and diesel prices, inflationary pressures could broaden.
In such a scenario, Nayar said the anticipated rate hike could be brought forward to October 2026 instead of December, depending on the trajectory of energy prices and their wider impact on the economy.