India’s Inflation Drops to 3.54% in July 2024, Lowest in Five Years

India’s Inflation Drops to 3.54% in July 2024, Lowest in Five Years

India’s Inflation Drops to 3.54% in July 2024, Lowest in Five Years

New Delhi, India – India’s Consumer Price Index (CPI) inflation fell to 3.54% in July 2024, the lowest in nearly five years, mainly due to a significant drop in vegetable prices. The State Bank of India (SBI) has warned that the future may still hold challenges, according to their research report.

Vegetable Prices Lead the Decline

Vegetable inflation dropped dramatically from 29.3% in June to 6.8% in July, playing a crucial role in reducing overall CPI inflation. The contribution of vegetables to the CPI also decreased from 1.77% in June to 0.55% in July. Additionally, prices of fruits and fuel showed signs of moderation.

Core CPI and Sector-Specific Pressures

Despite the overall positive trend, core CPI inflation, which excludes food and fuel prices, saw a slight increase from 3.12% in June to 3.30% in July, mainly due to higher mobile tariffs. The transport and communication segment also experienced a sharp rise in inflation from 0.97% in June to 2.48% in July.

Monsoon and Future Concerns

Food inflation stood at 5.06% year-on-year in July, influenced by a higher base effect. Uneven monsoon rainfall in key foodgrain-producing states and the strengthening La Nina conditions could lead to excessive rainfall in August and September, raising fears of crop damage and potential food price inflation.

Economic Outlook

India’s GDP is expected to surpass 7% in Q1 FY25, but geopolitical uncertainties pose risks to growth. The Reserve Bank of India (RBI) has maintained a tight liquidity stance to control inflation, deferring potential rate cuts to December 2024 or February 2025.

State-Wise Analysis

Most states recorded CPI inflation rates below the national average, with only six out of 22 states experiencing higher-than-average inflation. Rural areas generally saw higher inflation compared to urban areas, with only four states reporting higher urban inflation.

Global Monetary Policy Shifts

Historically, global capital flows are impacted when the U.S. Federal Reserve adjusts its interest rates. While the Fed’s recent rate hike cycle saw a synchronized global response, the current rate-cutting phase is less coordinated. Central banks in countries like China, Chile, Brazil, Mexico, the UK, Canada, and the European Central Bank have already begun reducing rates, while the Fed is expected to initiate cuts in September 2024.

Industrial Production

India’s Index of Industrial Production (IIP) grew by 4.2% in June 2024, down from 6.2% in May. The mining sector led the growth with a 10.3% increase, followed by electricity at 8.6% and manufacturing at 2.6%. For the April-June 2024 period, industrial growth stood at 5.2%, compared to 4.7% in the same period the previous year.

As India navigates the balance between growth and inflation, the coming months will be critical in shaping the country’s economic trajectory, especially with potential global shifts in monetary policy and the evolving monsoon season.

Doubts Revealed


Inflation -: Inflation means the increase in prices of goods and services over time. When inflation is low, things cost less.

Consumer Price Index (CPI) -: CPI is a measure that examines the average price of a basket of consumer goods and services, like food and transportation. It helps to see how much prices are rising or falling.

State Bank of India (SBI) -: SBI is the largest bank in India. It provides financial services like savings accounts, loans, and more.

Core CPI inflation -: Core CPI inflation is the change in the cost of goods and services but does not include food and energy prices. It shows the underlying trend of inflation.

Mobile tariffs -: Mobile tariffs are the prices you pay for using mobile phone services, like calling and internet data.

Monsoon rainfall -: Monsoon rainfall is the seasonal rain that happens in India from June to September. It is very important for farming.

La Nina -: La Nina is a weather pattern that causes cooler ocean temperatures in the Pacific Ocean. It can affect weather around the world, including India’s monsoon.

GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country. A higher GDP means the economy is doing well.

Q1 FY25 -: Q1 FY25 means the first quarter of the financial year 2025. In India, the financial year starts in April and ends in March.

Geopolitical uncertainties -: Geopolitical uncertainties are unpredictable events or situations in different countries that can affect the global economy, like wars or political changes.

Reserve Bank of India -: The Reserve Bank of India (RBI) is the central bank of India. It controls the money supply and interest rates to keep the economy stable.

Rate cuts -: Rate cuts mean reducing the interest rates. Lower interest rates make borrowing money cheaper, which can help boost the economy.

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