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Retail inflation eases to 5 month-low of 4.35% in September

By Priyanka Verma 
Updated Date

India’s retail inflation eased to a five-month low of 4.35% in September as food inflation decelerated sharply. This provides some comfort to the Reserve Bank of India which kept policy rates unchanged for the eighth time in a row last week to support nascent economic recovery.

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Data separately released by the statistics department showed index of industrial production (IIP) for August inched up to 11.9% from 11.5% a month ago. During August, mining, manufacturing and electricity output grew 23.6%, 9.7% and 16% respectively.

In September, food inflation declined to 0.68% from 3.11% a month ago as vegetable prices dipped 22.47% from their level a year ago.

In its latest bi-monthly monetary policy review last week, RBI looked more comfortable about the path of inflation than it was in August, despite the recent increases in global commodity prices. The central bank has cut its retail inflation forecast to 5.3% for the current financial year from 5.7% earlier.

“Going forward, the inflation trajectory is set to edge down during Q3:2021-22, drawing comfort from the recent catch-up in kharif sowing and likely record production. Along with adequate buffer stock of foodgrains, these factors should help to keep cereal prices range bound. Vegetable prices, a major source of inflation volatility, have remained contained in the year so far and are likely to remain soft, assuming no disruption due to unseasonal rains. Supply side interventions by the Government in the case of pulses and edible oils are helping to bridge the demand supply gap; the situation is expected to improve with kharif harvest arrivals,” RBI’s monetary policy committee had said in its statement.

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The MPC, however, observed that the resurgence of edible oils prices in the recent period is a cause of concern. “On the other hand, pressures persist from crude oil prices which remain volatile over uncertainties on the global supply and demand conditions. Domestic pump prices remain at very high levels. Rising metals and energy prices, acute shortage of key industrial components and high logistics costs are adding to input cost pressures. Weak demand conditions, however, are tempering the pass-through to output prices. The CPI headline momentum is moderating with the easing of food prices which, combined with favourable base effects, could bring about a substantial softening in inflation in the near-term,” it added.

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