Consumer Price Index (CPI) inflation was recorded at 5.02 per cent in September, government data showed. CPI inflation has decreased significantly from 6.83 per cent recorded in August.
The fall in inflation was led by cooling food prices. The Consumer Food Price Index (CFPI) Inflation was recorded at 6.56 per cent for last month, falling from 9.94 per cent in August.
Inflation cooled down in both urban and rural areas. As per the data, urban inflation was recorded at 4.65 per cent while rural areas saw 5.33 per cent inflation last month.
Inflation has returned to RBI's tolerance band of 2-6 per cent for the first time since June when it was recorded at 4.8 per cent. Due to soaring food prices, CPI inflation had surged to 7.44 per cent in July. However, it has declined since then due to softening vegetable prices which rose following erratic monsoon.
At the end of September, overall monsoon stood at 94.4 per cent of long term average, falling in the below normal category. Some areas of the country have seen deficient rainfall. Kharif sowing has been 0.2 per cent higher than last year due to robust paddy sowing. However, the sowing of pulses and oilseeds has seen decline of -4.2 and -1.61 per cent which led to fears of inflationary pressure.
According to data, pulses and products inflation stood at 16.38 in September, increasing from 13.04 per cent in August.
Vegetable prices have seen a massive drop. The data showed that vegetable prices cooled down to 3.39 per cent inflation from the high of 26.14 per cent in August.
The massive drop in vegetable prices has aided the fall of CPI inflation. Vegetable prices had become a key concern for inflation in the last few months.
For the July to September quarter, inflation has been recorded at 6.4 per cent. RBI had recently revised its CPI inflation projection for the September quarter to 6.4 per cent from the earlier forecast of 6.2 per cent.
Also Read | How RBI Underestimated Impact Of Monsoon On Inflation
RBI Governor Shaktikanta Das had said that high inflation is a challenge to macroeconomic stability. Commenting on the data, Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Shares and Stock Brokers, says, "The reduction in inflation would reassure the Reserve Bank of India and validate the central bank's decision to maintain its recent stance of unchanged policy rate."
On the inflation data, Dipti Deshpande, Principal Economist at CRISIL, says, "For the December quarter, we expect some softening in food inflation with the kharif harvest entering the market along with government intervention. But there could be limited respite for pulses and cereals inflation. Crude oil could play spoilsport if the Middle east conflict escalates."
RBI kept its repo rate unchanged at 6.5 per cent following the MPC meeting in October. In an interview to Outlook Business, MPC member Ashima Goyal had said that vegetable prices were expected to fall in September.
