Retail Inflation Expected to Drop Below 2% in September Due to GST Cuts

Retail Inflation Expected to Drop Below 2% in September Due to GST Cuts

The article reports that retail inflation is likely to drop significantly, falling below 2% in September, primarily due to the recent Goods and Services Tax (GST) rate cuts and the easing of vegetable prices.

Key Factors Driving the Inflation Dip

• Impact of GST Rate Cuts: The government’s GST rate rationalization, which reduced taxes on numerous daily-use and essential goods (including certain processed foods and white goods), immediately lowered their retail prices. This direct reduction in consumer costs is the most significant factor pushing the inflation index down.
• Eased Vegetable Prices: A favorable supply situation has led to a sequential easing of vegetable prices in the market. Since food items, particularly vegetables, carry a high weight in the consumer price index (CPI), this trend has contributed substantially to the overall drop in retail inflation.
• Boost to Purchasing Power: The resulting lower inflation is expected to boost the real income and purchasing power of households, acting as a positive stimulus for the economy ahead of the peak festive season.