Retail inflation in India eases to a three-month low in September

Retail inflation in India fell to a three-month low in September, owing to lower vegetable costs, but remained above the 4% target set by the central bank as a precondition for reducing rates.

Annual retail inflation was 5.02% in September, down from 6.83% the previous month. A Reuters survey of 66 economists predicted a rate of 5.50%. Retail inflation in June was 4.81%.

Food inflation increased 6.56% in September, compared to 9.94% in August, accounting for roughly half of the overall consumer price basket.

The Reserve Bank of India's (RBI) upper tolerance band of 2%-6% was not met in September. However, the RBI held its key lending rate constant for the fourth straight policy meeting earlier this month, emphasizing that it was aiming 4% inflation and that a print of less than 6% might not be enough to justify rate cuts.

In the preceding two months, vegetable prices were the primary driver of inflation, leading the government to restrict some rice exports and hike customs on onions.

Vegetable inflation fell drastically to 3.39% in September, from 26.14% the previous month. In September, cereal inflation fell to 10.95% from 11.85% in August. Since last year, India has prohibited the export of wheat.

To assist counter inflation, the government increased the cooking gas subsidy for low-income people from 200 rupees per cylinder announced in August to 300 rupees per cylinder.

According to two economists, core inflation, which excludes volatile food and energy prices, was predicted to be 4.5% in September, up from 4.6%-4.9% in August. The Indian government does not publish core inflation data.