India's official consumer price index at its life's low of 6.46% in September

13 October 2014

India's official consumer price inflation based on the consumer price index (CPI) dropped to 6.46 per cent in September, the lowest since the start of computing the consumer price index (CPI) in January 2012, bringing some relief to the common man ahead of the Diwali festival later this month.

The fall in the index, helped mainly by low prices of fruits and vegetables, saw overall food inflation fall to 7.67 per cent in September against 9.35 per cent in the previous month and 11.75 per cent in September 2013.

The CPI figures in September also showed an improvement over the August numbers of 7.73 per cent, making it the second straight month of declining CPI inflation (it had increased from 7.46 per cent in June to 7.96 per cent in July).

Consumer price inflation, which is the new benchmark for the Reserve Bank of India, now seems to be coming closer to Governor Raghuram Rajan's comfort zone of 6 per cent.

A fall in fuel prices thanks to global crude price movements also had a moderating effect on inflation, which means that if fuel prices rise again, the CPI may firm up.

The drop in food inflation is largely because inflation in the case of vegetables nearly halved from 15.15 per cent in August to 8.59 per cent in September. These may be due to seasonal factors as supplies increase around winter.

As per the government data released today, the CPI inflation in vegetable basket in September fell to 8.59 per cent as against 15.15 per cent in the previous month.

Inflation in fruits slowed to 22.4 per cent from 24.27 per cent in August. Price rise in protein rich items like eggs, fish and meat was slower in September against August.

All eyes are now on RBI's next policy review to be announced on 2 December. In its last monetary policy, RBI had maintained status quo on interest rate citing worries on the inflation front despite industry demanding reduction.

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