Consumer price inflation falls to 3.78%, to hit its lowest level

12 August 2015

Consumer price inflation based on the index of consumer prices for July slowed to 3.78 per cent, its lowest level on record, government data showed. Retail food inflation for the month stood at 2.15 per cent, sharply lower than the 5.48 per cent recorded in June.

Consumer prices, which have been falling over the last 19 months, have helped halve inflation from double-digit levels to below the Reserve Bank of India's 6 per cent target, giving the central bank room to shave 75 basis points or 0.75 per cent off its key repo rate this year.

Provisional data released by the Central Statics Organisation (CSO) showed a substantial decline in urban inflation rate to 2.94 per cent in July this year compared to 6.73 per cent in July 2014. Consumer price inflation for rural areas stood at 4.44 per cent in July 2015 against 7.95 per cent in the year-before period.

Food price inflation for urban areas stood at 1.01 per cent in July 2015 against 8.18 per cent in July 2014 while for rural areas food price inflation was lower at 2.83 per cent in July this year compared to 9.27 per cent in July 2014.

Consumer price increase hit an eight-month high in June, prompting the RBI to hold rates at 7.25 per cent in August. The central bank is likely to announce another rate cut before the end of the year, according to economists.

India's economy is expected to grow only 7.6 per cent in the fiscal year ending in April 2016, compared to 7.3 per cent last year, due to delays in implementing key fiscal reforms.

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