NEW DELHI: Consumer inflation fell sharply for the second month in a row in September, touching a 13-month low and validating the Reserve Bank of India’s decision to frontload an interest rate cut in anticipation of such a development.
The next bi-monthly policy review will take place on December 7. October’s inflation data will also be available by then. “The government has announced several measures to cool food inflation pressures, especially with regard to pulses. These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action,” RBI had said justifying its rate cut. IDFC Bank chief economist Indranil Pan expects RBI to reduce interest rates by 25 bps in the rest of the year but cautioned that pulses may get costlier as demand outpaces supply.
Following a good monsoon, the food price index was pulled down by vegetables and pulses. Vegetable price inflation was at -7.21% in September compared with 14% in July. The trend was along expected lines and is likely to be sustained next month as well. Rising crude and commodity prices shouldn’t be a cause of worry for retail inflation, economists said. “The first advance estimate of kharif crop production forecast a broad-based uptick in harvest of all crops, barring sugarcane, which should ease price pressures in the coming weeks,” said ICRA senior economist Aditi Nayar. “This, in conjunction with the favourable base effect, should dampen food inflation further in the next two prints.”