New Delhi: Retail inflation fell to multi-year low of 3.78 percent in July on account of cheaper food prices, including of vegetables, fruits and cereals.
The retail inflation based on Consumer Price Index (CPI) was at 5.40 percent in June 2015. In July 2014, CPI based retail inflation was as high as 7.39 percent.
Food inflation measured on Consumer Food Price Index during the month of July 2015 fell to 2.15 percent as against 5.48 percent recorded in June 2015, the official data released Wednesday showed.
Prices of vegetables fell sharply during the month from a year ago, with inflation printing a negative 7.93 per cent. Fruits also turned cheaper by 1.45 per cent during the month compared to the same month last year.
However, prices of protein-rich items such as pulses remained higher as inflation rose to 22.88 percent. Also, meat and fish prices turned costly by 7.02 percent.
Inflation in cereals and products was at 1.06 percent, eggs at 2.8 percent, milk and products at 6.12 percent and that for oils and fats was at 2.78 percent in July 2015.
Among others, sugar and confectionery prices contracted by 12.30 percent.
Spices prices rose by 9.09 percent, non-alcoholic beverages by 4.44 percent, prepared meals, snacks and sweets by 7.7 percent while that for food and beverages category by 2.89 percent.
The fall of 3.78 percent in consumer inflation was "much below the expectation" and was due to drop in food prices, India Ratings & Research Chief Economist Devendra Kumar Pant said.
"It is contradictory to daily price data released by the government. July vegetable prices has declined by nearly 8 percent. This will have a favourable impact on bond pricing and increase in probability of monetary easing," he said.
Crisil Chief Economist DK Joshi said the fall in inflation was a surprise on the positive side.
"Inflation is better than expected. However, the fall in inflation is a surprise on the positive side. For RBI's next move, it makes the chances favourable and I think it would like to watch before going for rate cut," Joshi said.
Inflation in fuel and light category stood at 5.36 percent, housing at 4.44 percent. Transport and communication prices fell by 0.35 percent.
Inflation for rural segment was 4.44 percent in July (from 6.07 percent in June) and that for urban sector was at 2.94 percent (as against 4.55 percent in June), the data showed.
