[introductory music] India's August 2024 headline CPI came in at three point six five percent year-on-year, broadly in line with our expectation and flat versus last month's print. Food inflation ticked up twenty basis point to five point three percent year-on-year due to higher fruits and vegetables inflation. Fuel stayed in the deflationary zone, reporting a negative five point three percent year-on-year, and core was steady at three point four percent. Fruits and vegetables tend to be volatile during the monsoon months. As per the daily vegetable prices reported by Department of Consumer Affairs for up until 12th September, vegetables could see a meaningful sequential decline in September. But for any weather anomalies, the near-term outlook on food inflation stays favorable. Headline CPI, ex of vegetables, was at a five-year low of three point one percent. Alongside, nearly sixty percent of the CPI basket by weight reports a sub-four percent inflationary print. Both these factors suggest that the inflation concerns are limited to a certain food items in India. While the core inflation shows signs of bottoming out from an ultra-low level, it stays still benign. India's headline inflation has fallen below RBI's central target point of four percent since July 2024. It is likely to stay around four percent for the remaining seven months of FY25. FY25 average CPI inflation could be twenty to thirty basis point lower than the RBI's estimate of four point five percent. Yet, we still think that it's a status quo on rates, at least in the next two policy. The growth inflation mix in India could allow RBI to be patient on any rate moves. Moreover, an improvement in banking system liquidity has led overnight rates to soften below the repo in the recent months.

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