India's CPI Inflation Eases To Three-Month Low At 5.02%

India's retail inflation eased in September, led by lower vegetable prices.

The Consumer Price Index-based inflation stood at 5.02% in September, as compared with 6.83% in August, according to data from the Ministry of Statistics and Programme Implementation released on Thursday.

A panel of economists polled by Bloomberg had estimated a reading of 5.4% for September.

Food and beverage inflation rose to 6.3% in September, as compared with 9.19% during August. Core inflation fell to 4.6% in September, from 4.8% in August. This was the lowest since April 2020.

Consumer price inflation fell within the central bank's target range of 4 (+/- 2)% for the first time in three months.

CPI inflation moderated appreciably to a three-month low, offering considerable relief, said Aditi Nayar, chief economist at ICRA. While the sequential moderation was broad-based, the food and beverages and the fuel and light segments witnessed a sizeable decline in their inflation prints, with the latter in particular leading to the lower-than-expected reading in the month, she said.

Notwithstanding the favourable headline inflation print, food inflation remains elevated, Nayar cautioned. Moreover, the uneven monsoon, lag in sowing of crucial Kharif crops such as pulses and oilseeds, and modest reservoir levels do not augur well for the outlook for food inflation, she said.

"In our view, perceived inflation during the festive period may have a larger impact on sentiment this year, as compared to 2022, when festivities were prioritised after two years of Covid," she said.

• Cereal prices rose 10.95% in September, as compared with 11.9% in August.

• Inflation in meat and fish increased to 4.11% from 3.7%.

• Inflation in eggs was at 6.42% as against 4.3% in the previous month.

• Inflation in milk and milk products was at 6.89%, as compared with 7.7%.

• Prices of oils and fats declined by 14% after falling by 15.3% in August.

• Vegetable prices rose 3.4%, as compared with a rise of 26.1%.

• Pulses inflation was at 16.4% as against 13%.

• Clothing and footwear inflation was at 4.61% versus 5.2%.

• Housing inflation was at 3.95%, as compared with 4.4%.

• Fuel and light inflation fell by 0.11% as against 4.3%.

The moderation in core inflation indicates that generalisation of price pressures has not taken place, said Gaura Sen Gupta, India economist at IDFC First Bank.

Hence, RBI is expected to remain on prolonged pause in FY24. The focus will remain on keeping liquidity condition tight to prevent generalisation of price pressures and enable transmission of past rate hikes, she said.