In August 2024, India’s Consumer Price Index (CPI) inflation was marginally higher at 3.65% YoY compared to 3.60% YoY in the previous month. Food inflation rose to 5.30% YoY in August 2024 from 5.06% in the previous month.

Vegetables (CPI weight: 6.0%) remained the primary driver of inflation, followed by cereals (weight: 9.7%) and pulses (weight: 2.4%). Inflation rates for vegetables, cereals, and pulses remained elevated in August at 10.7% YoY, 7.3% YoY, and 13.6% YoY, respectively. Food inflation also remained broad-based, with 40% of items in the food basket witnessing inflation rates surpassing 6%.

Core inflation, which excludes food and fuel, remained steady at 3.44% YoY. Core inflation and its refined measures, which further exclude valuables and transportation fuels, experienced an uptick in July due to a revision in mobile tariffs.

As of September 12, the monsoon recorded above-normal rainfall at 8% above the long-period average. The monsoon’s spatial distribution has also improved over the past month. Rainfall remains in excess in Central and Southern India, normal in the North, and deficient in East & North-East India.

We anticipate inflation to average around 4.3-4.5% YoY in FY25. The food prices may continue to impart volatility to headline inflation. The RBI MPC might consider shifting the policy stance to ‘neutral’ in the October meeting, as an above-normal monsoon is expected to ease food inflation.

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