September retail inflation at 13-month low to 4.31%

Consumer Food Price Inflation for September 2016 was 3.88%

Consumer Price Index-based inflation (CPI) for the month of September fell to 4.31 percent, the lowest in 13 months, on back of a fall in food inflation, especially that of pulses and vegetables. The drop justifies the Reserve Bank of India’s decision to cut key interest rates earlier this month and raising expectations of another rate cut.

CPI inflation for the previous month (August) was 5.05%, and for September last year was 4.41%. The previous lowest retail inflation rate was the month before that, in August 2015, when the headline number came in at 3.41%.

Consumer Food Price Inflation (CFPI) for September 2016 was 3.88%, down from 5.91% in August. For September last year, CFPI was 3.88% as well, as per the data released by Central Statistics Office released on Thursday.

“The inflation declined majorly due to ease in prices of food and beverages especially pulses, vegetables among others. Inflation rates have gone down in all segments except for fuel and light and miscellaneous in Sept’16,” said Madan Sabnavis, chief economist with Care Ratings.

Month on month, the prices for pulses in September rose 14%, compared with above 20% in the previous month. Vegetable prices fell 7% for the same period.

“We expect CPI inflation to be around 5% for the rest of the year,” Sabnavis said and added that while inflation in food items may continue easing owing to fresh crops entering into the market, there could be upward pressure on prices for brief period as the slowdown in harvesting process in certain parts of the country could affect the arrival of kharif crops.

On October 4, the Monetary Policy Committee, with new RBI Governor Urjit Patel at its helm, cut repo rates by 25 basis points, shifting completely from Raghuram Rajan’s hawkish focus on inflation.

“Going ahead, with inflation stabilising in coming months, we do expect another 25 basis points cut in rates in December by the RBI,” Sabnavis said.