Govt Expects Inflation to Fall to 9.5-10.5% Range in August

The government expects inflation to remain within the range of 9.5-10.5 percent in August due to stability in economic indicators, and further decline to 9-10 percent in September 2024. In its Monthly Economic Update & Outlook for August 2024, the finance division highlighted CPI inflation was recorded at 11.1 percent on a year-on-year basis in July 2024 as compared to 12.6 percent in previous month, and 28.3 percent in July 2023. On a month-on-month basis, it increased by 2.1 percent in July 2024 compared to an increase of 0.5 percent in the previous month. Major drivers contributing to the YoY increase in CPI were perishable food items (29.2 percent), Housing, Water, Electricity, Gas and Fuels (25.3 percent), Health, Clothing, Transport and others. SPI for the week ended on 22 August 2024, recorded a decrease of 0.10 percent as compared to the previous week. The report noted that the LSM sector is projected to sustain positive growth trajectory in FY2025, on the back of improved external demand, stable exchange rate, receding inflation and easing of monetary policy. For agriculture outlook, Kharif 2024 production is dependent on the crops specific weather pattern, which will play critical role in crop yield. The recent and ongoing rainfall spells can have positive and negative impact on rice, sugarcane, cotton, fodder and vegetables, if the rains did not swept away the farmlands. On external front, exports, imports and worker’s remittances (WRs) are following an upward trend. For the outlook, it is expected that exports will remain within the range of $2.5-3.2 billion, imports $4.5-5.0 billion and remittances around $2.6-3.3 billion in August 2024. The stable outlook of external sector hinges upon stable exchange rate, revived domestic economic activities, better agriculture output, low domestic and global commodity prices and improved foreign demand, the report noted.