Eight-Year Low: India's Retail Inflation Cools To 1.54% In September On Further Dip In Food Prices

India's retail inflation slipped to 1.54% in September, which is the lowest since June 2017, according to the official data shared by the Ministry of Statistics on Monday.

The downtick in consumer price index-based inflation, led by dwindling prices of food and core items, comes a month after inflation had edged higher to 2.07% in August. In the preceding month of July, it stood at 1.55%.

The September numbers are in line with estimates, as analysts tracked by Bloomberg had projected the CPI inflation for September to come in at around 1.5%.

Core inflation, which excludes the volatile food and fuel prices, rose to 4.58% in September as against 4.21% in the preceding month. This print was the highest since August 2023.

Inflation in food and beverages stood at - (negative) 1.37%, compared to 0.05% in August. Vegetable prices disinflated by 21.4% as against -15.92% in the preceding month.

With this, the country's headline inflation continues to remain well below the Reserve Bank of India's target of 2-6%.

The inflation slipped below the lower band of RBI's target for the second time in this quarter. This is driven by the seasonal correction in perishable food costs, with the segment declining year-on-year, said Radhika Rao, senior economist at DBS bank. "While excess monsoon might impact production in certain pockets, we don't expect that sequential impact to derail the ongoing disinflationary trend," she said.

"We expect the passthrough of GST cut to be more visible in the upcoming October reading, likely pushing the print to sub-1%," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Overall, the benign inflation and growth trajectory does provide room for 25-50 basis points rate cuts. "However, the festive linked surge in retail sales may make it difficult to gauge the underlying sustainable demand in the economy and, hence, the timing of easing may become more difficult.”

• Cereal inflation fell to 2.06% compared to 2.7% in August.

• Meat and fish prices rose by 2.15% compared to 1.5% in the previous month.

• The inflation rate for milk and milk products was at 2.6% compared to 2.7% in the previous month.

• Clothing and footwear inflation was at 2.3% compared to 2.5% a month ago.

• Housing inflation was at 3.2% compared to 3.1% the preceding month.

• Fuel and light inflation was at 2.4% compared to 2.7% in August.