CPI Likely to Settle at 2% in August: Bank of Baroda Report Highlights Deflation in Essential Commodities
New Delhi, Sep 11 (TheTrendingPeople.com): India’s consumer price index (CPI) is expected to settle at 2 per cent in August, according to a recent report by Bank of Baroda (BoB). The report attributes the moderation in inflation to a decline in the Essential Commodity Index (ECI) and favourable trends in both domestic production and global commodity prices.
BoB ECI in Deflation Territory
The public sector lender noted that the BoB ECI has recorded deflation for the fourth consecutive month, with a -1 per cent year-on-year (YoY) decline in August and -0.9 per cent in the first nine days of September.
“The major support for lower inflation has come from vegetables and pulses, aided by better production,” the report said. In particular, tomato, onion, and potato prices have shown a downward correction, with the most pronounced drop seen in tomato prices.
The report also highlighted that global food and energy prices have remained favourable, contributing to a lower domestic inflation outlook.
Government Measures Ease Inflationary Pressures
Bank of Baroda emphasized the role of government policy in moderating inflation. “The current move of the government to lower GST rates on the majority of FMCG and durable goods is a sigh of relief for inflation. We assess the overall impact on CPI to be 55-75 basis points,” the report stated.
Commodity-Wise Trends
Vegetables: Onion and Potato Lead the Deflation
Among the 20 commodities in BoB’s index, ten witnessed deflation, with onion and potato recording the sharpest declines.
- Onion: Retail prices fell -37.5 per cent YoY, marking the steepest drop since January 2021.
- Potato: Prices reached a 44-month low, reflecting strong supply and production.
Pulses: Consecutive Deflation Across Sub-Categories
Pulses also showed significant deflationary trends:
- Tur/Arhar: Down -29 per cent in August
- Urad: Declined -8.9 per cent
- Moong: Dropped -5.2 per cent
- Masoor: Fell -1.4 per cent
The report attributed this decline to improved production, particularly during the ongoing Kharif season, where sown areas of pulses have increased.
Cereals: Rice Prices Moderating
Among cereals, the retail price of rice has softened, although the pace of decline is slower compared to vegetables and pulses.
Month-on-Month Analysis
On a month-over-month (MoM) basis, BoB’s ECI recorded a 1 per cent increase in August. When adjusted seasonally, the MoM rise was 0.8 per cent, indicating that seasonal factors contributed to the sequential price build-up, while the broader inflation trend remains subdued.
Implications for the Economy
The moderation in CPI at 2 per cent provides relief for consumers and reduces pressure on household budgets. For policymakers, lower inflation allows the Reserve Bank of India (RBI) more flexibility in interest rate policy, balancing growth with price stability.
Bank of Baroda’s report suggests that strong domestic production, government measures, and global commodity trends are collectively supporting this favourable inflation trajectory.
Final Thoughts from TheTrendingPeople.com
With CPI projected at 2 per cent in August and essential commodities in deflation, India’s inflation outlook is improving after months of volatility. While seasonal factors and government interventions have played a significant role, continued monitoring of food and energy prices will be crucial in maintaining price stability.
For consumers, falling prices in key staples like onion, potato, and pulses provide tangible relief, and the trend could positively impact household consumption in the coming months.