Retail inflation rises to 3.65% in August, second lowest in last five years

Retail inflation rises to 3.65 per cent in August compared to 3.6 per cent in July, as per government data.

In Short

• India's retail inflation rose to 3.65% in August
• Food inflation increased to 5.66% in August
• Monsoon risks and weak rupee may keep inflation high

India's retail inflation rose to 3.65% year-on-year in August, up from a five-year low of 3.54%, according to data released on Thursday.

August's inflation rate is the second lowest in the last five years. Corresponding inflation rates for rural and urban areas are 4.16% and 3.14%, respectively.

Food inflation, which represents about half of the Consumer Price Index (CPI) basket, increased to 5.66% in August, compared to a 13-month low of 5.42% in the previous month.

Despite this uptick, inflation remains within the Reserve Bank of India's (RBI) acceptable range of 2-6%. However, it is still below the RBI's target of a "durable 4%", as outlined by Governor Shaktikanta Das.

A weak rupee combined with risks from the monsoon is likely to keep inflation high in the near future.

In August, inflation for vegetables increased to 10.71%, up from 6.83% the previous month. This rise is linked to worries about erratic monsoon rains potentially affecting crop yields and driving prices higher later on. Inflation rates for pulses and cereals were 13% and 7.31%, respectively.

For fuel and light, the inflation rate for August was -5.31%, compared to -3.66% in July. Inflation in the clothing and footwear sector was 2.72%, while the housing sector saw an inflation rate of 2.66%.