Rate cut difficult this year as Aug inflation a tad higher than 2 pc mark: Report

New Delhi, Sep 13 With August inflation print a tad higher than the 2 per cent mark, a rate cut in October is unlikely, according to a report by SBI Research, adding that even a rate cut in December looks a little difficult if growth numbers for Q1 and estimated Q2 data are taken into consideration.

As the Goods and Service Tax (GST) rate on around 295 essential items has been reduced from 12 per cent to 5 per cent or NIL, the consumer price index (CPI) inflation in this category may come down by 25-30 basis points in FY26 after considering a 60 per cent pass through effect on food items, said the report.

Apart from this, the rationalisation of GST rates of services should also lead to another 40-45 bps reduction in CPI inflation on other goods and service items, considering a 50 per cent pass-through effect.

"Overall, we believe CPI inflation may be moderated in the range of 65-75 bps over FY26-27," SBI Research said.

India’s CPI inflation, which moderated to a 98-month low of 1.55 per cent in July this year, has recorded a slight uptick in August at 2.07 per cent, due to a rise in food and beverages inflation, which was negative in the last 2 months.

Inflation on ‘meat and fish’ has increased to 1.48 per cent in September, which was negative during April-July. Vegetable prices continued to stay in the negative zone, though inched up marginally in August to –15.92 per cent.

Pulse prices declined by –14.53 per cent, while spice prices also exhibited a decline in August. Fruit inflation also declined to 11.65 per cent, while Oil and fat CPI increased to 21.24 per cent.

India’s core inflation increased again to 4.16 per cent. Both rural and urban CPI inflation have increased in August to 1.69 per cent and 2.47 per cent, compared to 1.18 per cent and 2.10 per cent in July, respectively.

The state-wise inflation indicates that out of 35 States and Union Territories, 26 of them have recorded inflation under 4 per cent, the report noted.

There are only Kerala and Lakshadweep whose inflation rate was over 6 per cent.

India's kharif sowing has covered 2.5 per cent more area this season than last year, but weeks of torrential rainfall threaten to wash away those gains. All-India rainfall between August and September 11 was nearly 8.7 per cent, the report stated.

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