According to government data released on Tuesday, retail inflation fell to a five-month low of 4.35 per cent in September from 7.27 per cent in the same period a year ago, as prices of vegetables and other commodities declined. The moderation in CPI-based inflation is in line with the assessment of Reserve Bank Governor Shaktikanta Das, who recently forecast a substantial moderation in retail inflation.
CPI inflation was 5.3 per cent in August and 7.27 per cent in September 2020. Earlier, the CPI was lower at 4.23 per cent in April 2021.
According to data released by the National Statistical Office (NSO), inflation in the food segment declined to 0.68 per cent in September, down from 3.11 per cent in the previous month.
The data shows that inflation in the vegetable basket declined by 22.47 per cent in September as compared to a fall of 11.68 per cent in August. Fruits, eggs, meat and fish, and pulses and produce segments also saw lower rates of price addition.
However, inflation in terms of fuel and light stood at 13.63 per cent in September, up from 12.95 per cent in August. Icra’s chief economist Aditi Nair said the extent of decline in year-on-year CPI inflation in September 2021 has come down to 4.35 per cent from 5.3 per cent in the previous month, and is higher than ICRA’s forecast. has been driven primarily by food items, and to a lesser extent, housing.
He said a higher base is expected to temporarily bring down CPI inflation to below 4 per cent for October-November 2021, before resuming in the remaining part of this fiscal.
“In our view, the MPC (Monetary Policy Committee) will continue to ignore supply-side risks to inflation, particularly if they arise from a global surge in commodity prices, on which monetary policy has little effect, and the stance A sustainable domestic demand revival only after the change prompts producers to raise prices,” Nair said.
Sreejith Balasubramaniam, Economist, Fund Management at IDFC AMC, said the main driver of the latest print is moderation in food and beverage prices, while core inflation remains at 5.8 per cent.
Balasubramaniam said commodity prices, especially crude oil, and its partially offset effect on inflation and consumption demand, at a time when aggregate demand in the economy is still below pre-pandemic levels, are also important. Will happen.
The Reserve Bank of India (RBI), which primarily factors in CPI-based inflation while arriving at its bi-monthly monetary policy, has been tasked by the government to keep it at 4 per cent, with a tolerance band of 2 per cent. Both sides.
In his statement after the rate setting committee meeting last week, Das said that overall, the CPI headline momentum is waning, which, coupled with favorable base effects, could lead to a substantial moderation in inflation in the coming months. near term.
RBI forecasts CPI inflation at 5.3 per cent for 2021-22: 5.1 per cent in Q2, 4.5 per cent in Q3; 5.8 percent in the last quarter of the fiscal year, the risk broadly balanced. Retail inflation for the April-June period of 2022-23 is estimated at 5.2 per cent.
Das had also said that the RBI monitors the rising inflation situation and is committed to bring it closer to the target in a gradual and non-disruptive manner.
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