Retail inflation in India is expected to have decreased in August, but it likely remained elevated at 7%, well above the Reserve Bank of India's upper tolerance band of 6%. According to a survey of 21 economists by Moneycontrol, the Consumer Price Index (CPI) inflation is predicted to have dropped to 7.0% in August from July's 15-month high of 7.44%.

The Ministry of Statistics and Programme Implementation will release retail inflation data for August and industrial production data for July on September 12. Economists anticipate that industrial growth, as measured by the Index of Industrial Production (IIP), will have risen to 5.0%.
The decline in CPI inflation in August is expected to result from lower food prices, thanks to supply-side measures implemented by the government. However, the impact of reduced vegetable prices, particularly tomatoes, is likely to be felt in September rather than August.
Food and beverage inflation is expected to remain close to double digits in August, continuing the trend from July when it was at 10.57%. Additionally, fuel inflation is anticipated to rise to over 5% from 3.67% in July due to fading base effects and an increase in kerosene prices and electricity tariffs.

Core inflation, excluding food and fuel, is expected to have eased slightly in August to around 4.8% from 4.9% in July.
The Reserve Bank of India (RBI) and markets are prepared for only a modest decline in inflation for August, with hopes pinned on September to bring down the inflation trajectory more in line with the central bank's forecast. The RBI had raised its CPI inflation forecast for July-September to 6.2% and for 2023-24 as a whole to 5.4% while keeping the repo rate unchanged.
Despite short-term fluctuations, the RBI's unchanged longer-term inflation forecast indicates its expectation that inflation will gradually moderate toward the mandated 4% target.

Regarding industrial growth, the Index of Industrial Production (IIP) data for July, set to be released on September 12, is expected to show a 5.0% increase, up from 3.7% in June. The boost in industrial growth is attributed to favorable base effects and a strong growth momentum in the government's capex cycle.

However, uneven monsoon rainfall and dry spells in August may negatively impact rural demand, while external sector challenges could weigh on manufacturing sector growth. Despite some uncertainties, high-frequency data suggests that India's industrial growth may have picked up pace in July.

Overall, while India grapples with inflationary pressures, economic indicators indicate a mixed outlook, with various factors influencing the trajectory of inflation and industrial growth.

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