India’s retail inflation has cooled sharply to 1.54% in September. This marks the lowest rate in eight years. The figure has fallen below the Reserve Bank of India’s lower tolerance limit of 2%. The decline is primarily driven by lower food prices across the board.
Food inflation turned negative, reaching -2.28%. This is the fourth straight month of negative food inflation. Key staples saw significant price drops, contributing to this trend.
Vegetable prices plunged by 21.38% compared to last year. Pulses followed with a 15.32% decrease. These items heavily influenced the overall food basket’s decline.
Dharmakirti Joshi, chief economist at Crisil, highlighted the main contributors. Vegetables, edible oils, fruits, and pulses led the decline. Their falling prices have eased the cost of living for many households.
Rural areas experienced inflation of just 1.07%. Urban inflation moderated to 2.04%. This disparity reflects differing consumption patterns and price pressures.
Core inflation, which excludes food and fuel, rose to 4.5%. Surging gold prices partly fueled this increase. It shows underlying pressures despite the overall low inflation.
Economists anticipate inflation to stay low in the coming months. The GST reforms implemented in September are a key factor. They are expected to keep retail prices in check.
Low crude prices also support this outlook. Combined with GST rationalization, they create a favorable environment. This could sustain the current inflation trend.
The Reserve Bank of India’s target band is 2-6%. The current rate is well below the lower end. This may influence future monetary policy decisions.
Negative food inflation has been consistent for four months. It underscores a broader trend of price stability. Consumers are benefiting from more affordable groceries.
Joshi reiterated that inflation is expected to remain benign. Structural reforms and external factors are at play. This provides a cushion against sudden spikes.
The sharp fall in vegetable and pulse prices is notable. It reflects good harvests and efficient supply chains. These elements are crucial for maintaining low inflation.
Overall, the data signals a period of economic moderation. With inflation at an eight-year low, policymakers have room to maneuver. The focus may shift to stimulating growth.
The impact of GST on retail prices is becoming evident. As the system stabilizes, its deflationary effects could persist. This aligns with economists’ projections for the near term.