Retail inflation dropped to its lowest point in three months, reaching 5.02% in September, primarily driven by the easing of food prices, according to the government data released on Thursday.
This decline brings inflation back within the Reserve Bank of India’s tolerance band of 2%-6%. The inflation based on the consumer price index (CPI) was 6.83% in August after reaching a 15-month high of 7.44% in July.
The decrease in retail inflation to 5.02% in September is attributed to a moderation in vegetable and fuel prices. The inflation in the food basket came down to 6.56% in September from 9.94% in August, the data released by the National Statistical Office (NSO) showed.
The Reserve Bank has identified high inflation as a major risk to macroeconomic stability and sustainable growth. Speaking at a press conference to announce the central bank’s monetary policy last week, Governor Shaktikanta Das had estimated that the September retail inflation number may be lower than August and July figures.
The CPI inflation moderated to 4.6% in the first quarter of 2023-24 as compared to 7.3% in the same period a year ago.
The RBI has retained the inflation forecast for 2023-24 at 5.4%.
The World Bank, however, has increased its retail inflation forecast for India for 2023-24 to 5.9% from the 5.2% estimate made in April.
“Abnormal rainfall during the monsoon months caused a sharp increase in food prices in July 2023. Though eased in August, it is expected to continue to weigh on headline inflation through the rest of the fiscal year,” the World Bank said in its half-yearly India Development Update released on 3 October.
“While the spike in headline inflation may temporarily constrain consumption, we project a moderation. Overall conditions will remain conducive for private investment,” said Dhruv Sharma, Senior Economist, World Bank, and lead author of the report. “The volume of foreign direct investment is also likely to grow in India as rebalancing of the global value chain continues.”
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