For the second successive month, retail inflation has stayed below the 4 per cent mark. Importantly, for 12 months now from September last year, retail inflation measured by the consumer price index (CPI) has remained firmly below the 6 per cent threshold.

The latest data that the national statistical office (NSO) released on September 12 showed that the consumer price index (CPI) in August grew 3.65 per cent, lower than half the level of 6.83 per cent in the same month last year. CPI inflation was 3.6 per cent in July 2024.

For any macroeconomic and monetary policymaker, a consistent descent in the economy-wide price line’s gradient is always a happy sight to behold. Over the last one year, India’s inflation trend line has been steadily sliding—from nearly 7 per cent to inching towards 3.5 per cent.

This is a happy augury. Consumer price inflation, which is the main marker that the Reserve Bank of India (RBI) tracks for interest rate related decisions, is now much within the comfortable range of 2-6 per cent.

This trend, should it hold for the next few months, should be a reason enough for the central bank to start lowering the repo rate—the rate at which the banks borrow from the RBI.

The RBI has remained steadfast on its focus to rein in inflation rates, which had remained stubbornly high for several months. The goal is now keeping the price genie firmly bottled up for a considerable period of time, giving enough confidence to the central bank as well as consumers.

Crucially, food inflation for August, 2024 is the second lowest since June, 2023. Consumer food price inflation for the month stood at 5.66 per cent (Provisional) for the month of August, 2024.

Vegetable inflation stood at 10.71 per cent during August. The relatively galloping prices in the vegetables could be primarily because of floods in several key states that may have resulted in supply shocks of specific items. One would be hoping once the monsoon rains retreat and the markets are flushed with fresh supplies of the kharif crop, food prices would moderate further.

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While the RBI's repo rate hikes and tight liquidity stance have curbed demand-side inflation pressures, on the supply side, the government’s initiatives to improve food supply chains and reduce logistics costs have helped ease food inflation.

The other key component in the price data is that household goods and services inflation for August has reported at 2.43 per cent. For too long, India’s price management challenge has been as much about lifestyle inflation as about food prices. Personal care products has reported an inflation of 7.94 per cent in August, implying most products such as deodorants and lipsticks may have turned sharply dearer compared to a year ago.

With food inflation broadly under control, policy makers should focus on cooling prices that, according to estimates, take up more than half of people’s spending. This includes spendings on communication and recreation, and even essential services such as healthcare and education.

Another component that could knock up prices at home is the weakening of the rupee vis-à-vis the dollar.

This has made imported goods – from computers, to imported mobile phones, to gold, to imported fruits and chocolates, costlier. Overseas education and travel is now more expensive than a year ago.

While all eyes will be on the RBI to lower rates ahead of the festive season, the medium term price management plan should have a firm focus on taming services inflation and cushioning the consumers from knock-on effects of a weaker rupee.