Retail inflation at 4.31%, a 13-month low

The Dollar Business Bureau

Retail inflation dropped sharply for the second consecutive month in September, reaching a 13-month low endorsing the Reserve Bank of India’s (RBI) decision for an interest rate cut in anticipation for such a development.  

The data issued by the Central Statistics Office on Thursday showed the combined consumer inflation rate at 4.31 percent for the month of September compared to 5.05 percent in August and 6.07 percent in July. The drop was because of a sharp decline in food inflation to 3.88 percent in September as against 5.91 percent in August. 

The latest data raises hopes of a further cut in rates as the inflation outlook could be benign for around six months and there is a good chance that consumer inflation will remain below RBI’s target of 5 percent for March 2017.  

The data on Thursday comes days after industrial production declined more than what is estimated for second month in a row in August, due to a steep drop in the capital goods and subdued mining activity due to a good monsoon.  

On October 4, the Monetary Policy Committee meeting headed by RBI Governor Urjit Patel cut the key interest rates (repo rate) by 25 basis points to 6.25 percent, taking most of the experts by surprise.  

After a good monsoon, the prices of food were pulled down by pulses and vegetables. Vegetable price inflation witnessed a decline of 7.21 percent in September compared to the 14 percent in the month of July.