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ICICI Direct: India’s August CPI Inflation Remains Sticky But Outlook Favourable

Higher petrol and gold prices are likely to weigh on India’s core inflation rate over the next few months, ICICI Direct says.

A vendor holds mixed denominations of India rupee banknotes while standing near baskets of fish at the Kasimedu fish market (Photographer Dhiraj Singh/Bloomberg)
A vendor holds mixed denominations of India rupee banknotes while standing near baskets of fish at the Kasimedu fish market (Photographer Dhiraj Singh/Bloomberg)

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ICICI Direct Report

Consumer price index (CPI) inflation for August 2020 was marginally lower at 6.6% from the revised July 2020 figure of 6.63% (earlier projected at 6.93%).

Average retail inflation in Q2 FY21, H1 FY21 so far is at 6.7%, 6.6% respectively.

The combined food price inflation (CFPI) for August was at 9.05% against 9.27% in July, primarily driven lower by cereals and products while vegetables inflation at 11.4% remained high.

Transport and communication and personal care and effects inflation remained high due to higher retail fuel prices and higher gold prices.

Vegetables prices remain a key contributor of food inflation. In the first half of September, vegetables prices have increased further particularly tomatoes, onions, potatoes, etc.

This may keep pressure on next month’s inflation data print as well despite favourable base effect.

Impact of higher retail petrol prices and gold prices is like to continue for the next few months putting pressure on core inflation.

Click on the attachment to read the full report:

ICICI Direct Inflation.pdf

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