| Consensus | Consensus Range | Actual | Previous | |
| Year over Year | 5.57% | 4.90% to 5.70% | 5.54% | 4.82% |
Highlights
India’s consumer price index rose 5.54 percent on the year in August, up sharply from an increase of 4.82 percent in July. This is the eleventh consecutive increase in headline inflation and takes inflation to its highest level since October 2024 and close to the top of the Reserve Bank of India's target range of two percent to six percent.
The increase in headline inflation was driven by a bigger increase in food and beverage prices, up 3.35 percent after a previous increase of 2.11 percent, with most other categories also recording solid increases. Inflation in urban areas rose from 2.75 percent in January to 3.02 percent in February, while inflation in rural areas rose from 2.73 percent to 3.37 percent.
At the RBI's most recent policy meeting, held last week, officials hiked rates by 25 basis points, the first increase since 2023, noting the impact on the inflation outlook of the Iran conflict and adverse rainfall patterns in the current monsoon season. Annual headline and core inflation are now forecast to be 5.2 percent and 4.4 percent respectively, up from the previous forecasts of 5.0 percent and 4.3 percent respectively.
Officials concluded then that “it is clear that inflation and its outlook are not benign as they were last year" and that"recalibrating the policy rate is imperative". The policy stance was also been changed from"neutral" to one of"calibrated tightening". Rate cuts, they advised, will not be considered in the near term, with additional rate hikes likely to be considered in upcoming meetings. Today's data increases the chances of further tightening at the next meeting in early December.
Market Consensus Before Announcement
The consensus sees energy costs increasing annual CPI inflation to 5.57 percent on year in September from 4.82 percent in August.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Within the overall CPI basket, food (47 percent) has easily the largest weight of any of the major components and a separate consumer foods price index is also released. Monthly and annual changes in the CPI provide widely used measures of inflation and the latter is the policy target of the Reserve Bank of India (RBI).
Description
CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.