New Delhi, Oct 12 (Mayank Nigam) India’s retail inflation softened to 4.35 per cent year-on-year in September as compared to 5.30 per cent in the previous month on the back of favourable base and cooling of food prices. The retail inflation was at 7.27 per cent in September, 2020. The inflation rate below the RBI’s upper tolerance level of 6 per cent is a relief for policy-makers. As per the data released by the National Statistical Office (NSO), the food inflation eased to 0.68 per cent in September 2021 from the high of 3.11 per cent in the previous month. The Consumer Food Price Index (CFPI) was 10.68 per cent in September, 2020. “CPI inflation was expected to drop in September 2021, with the base effect kicking in. Nevertheless, it comes as a relief for the policy makers specially at a time when economic growth is just about gathering momentum,” said Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India.
“However, high core inflation and fuel inflation remains a cause of concern. With global economic growth gathering momentum, there could be further upward pressure on commodity prices and central bank would be wary of that. However, there is unlikely to be any change in policy rates in the current year,” she noted. The consumer price index (CPI)-based retail inflation has been below 6 per cent for the last three months now. ICRA Chief Economist Aditi Nayar said that a high base is expected to temporarily dampen the CPI inflation for October-November 2021 to below 4.0 per cent before an upturn resumes in the remainder of this fiscal. “In our view, the MPC (Monetary Policy Committee) will choose to continue to ignore supply side risks to inflation, especially if they emanate from a global surge in commodity prices, on which monetary policy has little impact, and change the stance only after a durable domestic demand revival emboldens producers to raise prices,” she said. Announcing bi-monthly monetary policy, RBI Governor Shaktikanta Das last Friday kept rates unchanged and maintained accommodative stance to support economic recovery and growth.