India’s consumer price index (CPI)-based headline retail inflation dropped to a nearly five-year low of 3.54% in July, primarily due to a sharp reduction in food prices. According to data released by the National Statistical Office (NSO) on Monday, food inflation saw a significant decline to 5.42% in July from 9.36% in June.

This drop was largely driven by a deceleration in the prices of cereals (8.14%), fruits (3.84%), and vegetables (6.83%). However, while the inflation rate for pulses decreased to 14.8% from the previous month, it still experienced a double-digit rise in July.

In a related development, the growth in the index of industrial production (IIP) also slowed, registering a three-month low of 4.2% in June, down from an upward-revised 6.2% in the preceding month. The deceleration in IIP growth was largely attributed to a slowdown in manufacturing (2.6%) and electricity production (8.6%). Conversely, mining saw accelerated growth, rising to 10.3% in June.

The Reserve Bank of India (RBI) Governor Shaktikanta Das, in his post-monetary policy committee (MPC) statement on Thursday, noted that headline inflation had remained steady at 4.8% during April and May 2024 before increasing to 5.1% in June, primarily due to persistent food price inflation.

In the use-based categories of the IIP, growth declined across all six categories, reflecting the broader slowdown in industrial activity.

These developments underscore the ongoing challenges in balancing inflation control with sustaining industrial growth in India’s economy.