India’s August CPI inflation dips to 6.83%, easing pressure on RBI

What is CPI?

CPI is a measure used to track changes in the average prices of a basket of goods and services over time. It helps gauge inflation by reflecting how much more or less consumers need to spend to maintain their standard of living. Central banks and policymakers use CPI data to make economic decisions.

This is the fourth time that the CPI, or retail inflation rate, has exceeded the RBI’s 4-6% range for 2023. When determining the benchmark interest rate (repo rate), the RBI primarily considers retail inflation. The central bank forecasts 5.4% CPI inflation for 2023–2024.

On the other hand, the Consumer Food Price Index (CFPI) which measures changes in retail prices of food products consumed by a defined population group in a given area concerning a base year has decreased by 157 basis points from 11.51% in July 2023 to 9.94% in August 2023. This is still higher than August 2022, which stood at 7.62%. The decline in inflation was driven by a slowdown in the prices of food items. The prices of non-food items also rose at a slower pace in September 2023.

On the industrial front, India’s industrial output grew by 5.7% in July up from 3.8% in June. The July Index of Industrial Production (IIP) growth of 5.7% exceeded expectations of 5.0%.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.