India's Retail Inflation Rises to 4.82% in August

India's annual retail inflation increased to 4.82% in August from 4.45% in July, driven by rising food and fuel prices. This marks the third consecutive month inflation has stayed above the Reserve Bank of India's medium-term target of 4%, reinforcing expectations of an interest rate hike in October.

Food inflation climbed to 5.95% in August from 5.52% in July, influenced by weak monsoon showers and sharp price increases in staples such as ginger, onion, and garlic. Transport inflation also accelerated to 4.60% in August from 4.43% the previous month.

Wholesale price-based inflation rose to 9.92% in August, up from 9.78% in July, reflecting higher prices in food, manufactured items, and the fuel and power sectors. Inflation in the food index increased to 7.05% from 6.65%, while manufactured items saw wholesale price inflation reach a series high of 8.37%, slightly above July's 8.29%. The fuel and power basket recorded wholesale price inflation of 22.93%.

The Reserve Bank of India's monetary policy committee last month kept benchmark policy rates unchanged at 5.25% and projected retail inflation at 5% for the fiscal year 2026-27. The committee cited a deficient and uneven South-West monsoon amidst El Nino conditions as factors influencing inflation.

Economists note that the August inflation figure of 4.82% is marginally higher than the 4.80% expected in a Reuters poll and remains within the RBI's 2-6% inflation tolerance band. However, the persistent rise in food and fuel prices strengthens the case for a possible interest rate hike in October.