India expects food inflation to ease in the absence of climatic shocks, and low oil prices will be a "bright spot for the economy", the government's monthly economic report said on Thursday.

India's central bank said this month headline inflation may average 4.5% in the second half of the fiscal year, aided by weaker crude oil prices, but volatility in food prices could pose a challenge.

India's retail inflation (INCPIY=ECI) was 3.65% in August, higher than the revised 3.60% in July, as vegetable prices soared.

While the report retained the nation's GDP growth projection of 6.5%-7% for the current fiscal year, it said urban consumption was showing some signs of weakness, evident in declining auto sales between April and August.

High transport costs are a key constraint for Indian businesses in increasing exports, the report said.

Indian goods exports in August fell for a second straight month, which traders blamed on rising shipping costs, an economic slowdown in China and recessionary trends in Europe and the United States.

(Reporting by Pushkala Aripaka; Editing by YP Rajesh and Mark Potter)