India's Retail Inflation Likely Accelerated to 4.88% in August

India's headline retail inflation is projected to have quickened to 4.88% in August, up from 4.44% in July, according to an analysis by Union Bank of India. If realised, this would mark the second straight month of acceleration and the highest reading in the current 2023-24 series.

The expected uptick is attributed to sustained pressure on food prices and a further rise in fuel inflation. Food inflation is seen climbing to 6.03% from 5.24% in July. However, the composition of this increase is likely to change, with vegetable inflation moderating sharply to just 0.39% year-on-year. This easing is expected to be offset by firmer prices in other essential food categories.

A notable outlier is sugar, where inflation is projected to surge to 11.53% month-on-month in August — a record high — following an estimated 15% jump in prices during the month. Data from the Department of Consumer Affairs points to broad-based price increases across sugar, vegetables, cereals, and edible oils, while pulses and milk prices have remained largely firm.

Looking ahead, milk inflation is anticipated to strengthen over the next couple of months following recent retail price revisions across several states. Cereal inflation is estimated to have risen to 2.2%, while pulses inflation increased to 2.7%, reflecting tight domestic supplies and persistent pricing pressure.

Excluding vegetables, CPI is expected to have risen further to 5.11%. Core inflation likely increased to 4.30% from 4.15% in July, while core inflation excluding precious metals and auto fuels is also seen inching up to 2.70%.