(source : ANI) ( Photo Credit : ani)
India’s Inflation Rises Slightly in August, Dimming Hopes for RBI Rate Cuts
India’s retail inflation ticked up in August, making it tougher for the Reserve Bank of India (RBI) to consider interest rate cuts soon. According to the latest SBI Research report, August’s Consumer Price Index (CPI) inflation hit 2.07 per cent, just above the 2 per cent mark. This slight rise has cooled expectations for a rate cut in October, and even December looks uncertain now.
The report points out that India’s economy showed stronger-than-expected growth in the first two quarters of the fiscal year. "With August inflation a tad higher than 2 per cent, an October rate cut seems challenging," the SBI Ecowrap noted. Growth estimates for Q1 and Q2 make a December cut even harder to pull off.
But there’s some good news on the inflation front. The government recently slashed GST rates on around 295 essential items, dropping them from 12 per cent to 5 per cent or even zero. This move could ease non-food inflation by 25-30 basis points in FY26, assuming 60 per cent of the benefits pass on to consumers. Changes in GST on services might shave off another 40-45 basis points from non-food items, based on a 50 per cent pass-through.
July brought relief with inflation dipping to a 98-month low of 1.55 per cent, but August reversed that trend. Food and beverage prices drove the uptick, pushing core inflation (excluding food and fuel) to 4.16 per cent. Rural inflation climbed to 1.69 per cent from 1.18 per cent in July, while urban areas saw it rise to 2.47 per cent from 2.10 per cent.
Experts blame the base effect for this jump. Last year’s high prices aren’t dragging down comparisons anymore, so real price increases stand out more clearly.
Across India, inflation stayed manageable in most places. Out of 35 states and union territories, 26 reported rates below 4 per cent in August. Kerala bucked the trend as an outlier, with inflation soaring to 9.04 per cent—fueled by a sharp spike in coconut oil prices, a daily essential there. Kerala’s rural inflation hit 10.05 per cent, and urban areas reached 7.19 per cent. Lakshadweep also crossed 6 per cent.
Weather could stir things up further. Heavy rains lashed key agricultural states like Punjab, Haryana, Rajasthan, and Gujarat, with nationwide rainfall from August to early September about 9 per cent above normal. Some areas got even more downpour, which might disrupt food supplies and nudge food inflation higher in the months ahead.
As RBI keeps a close eye on these trends, Indian households and businesses will watch how inflation and potential rate cuts play out for loans, savings, and everyday costs.
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