Inflation hits 8-year low on cheap greens, higher base

India's retail inflation cooled to 1.54% in September from 2.07% the previous month, marking the lowest reading since June 2017, due to the statistical effect of a favourable base and driven by lower prices of vegetables and pulses.

- Payal Bhattacharya [e-mail]

Core inflation, on the other hand, shot up to a two-year high of 4.43% due to a sharp surge in prices of gold and silver ahead of the festive season.

This is broadly in line with the economists' projection of 1.5% in a Mint poll. With this, inflation has slipped below the lower tolerance limit of the Reserve Bank of India's (RBI's) 2-6% target band for the second time in three months. However, since this is largely driven by the base effect, it is unlikely to be a cause for concern.

In September 2024, food inflation had jumped to 9.2% from 5.7% the previous month, creating a favourable base this year.

As such, food inflation declined to (-)2.28% in September from (-)0.64% in August. Apart from the base effect, the fall in prices of vegetables and pulses helped pull headline inflation down. Food makes up nearly 40% of the inflation basket and has a heavy influence on the headline inflation.