New Delhi: Retail inflation declined to a three-month low of 5.02 per cent annually in September on account of moderation in vegetables and fuel prices, and back within the Reserve Bank's comfort level.
The inflation based on Consumer Price Index (CPI) was 6.83 per cent in the preceding month and 7.41 per cent in September 2022.
The previous low was in June this year when the reading stood at 4.87 per cent.
According to the data released by the National Statistical Office (NSO), the inflation in the food basket came down to 6.56 per cent in September from 9.94 per cent in the preceding month.
The price rise in the vegetables basket slipped to 3.39 per cent in September compared to 26.14 per cent in August.
The inflation declined in the 'oil and fats' (-14.04 per cent) and 'fuel and light' (- 0.11 per cent) during the month under review.
As per the data, the inflation in the rural areas was at 5.33 per cent, higher than 4.65 per cent in urban areas.
Inflation in the food basket was higher in rural areas at 6.65 per cent as compared to 6.35 per cent in urban areas.
Among the states, the highest retail inflation was in Rajasthan at 6.53 per cent and lowest in Chhattisgarh at 1.98 per cent. The retail inflation in Delhi was at 2.24 per cent, much below the national average of 5.02 per cent.
Aditi Nayar, Chief Economist at credit rating agency ICRA, said that while the sequential moderation was broad-based, the food and beverages and the fuel and light segments witnessed a sizeable decline in their inflation prints.
"Notwithstanding the favourable headline inflation print, food inflation remains elevated. Moreover, the uneven monsoon, lag in sowing of crucial kharif crops such as pulses and oilseeds and modest reservoir levels do not augur well for the outlook for food inflation," she said.
Nayar also said the core-CPI (excluding food and beverages, fuel and light and petrol and diesel for vehicles) inflation dipped to 4.7 per cent in September, the lowest since February 2020.
Ranen Banerjee, Partner, Economic Advisory Services at PwC India, said the good news is that the core inflation, excluding fuel and food, has gone below 5 per cent.
"We can expect the policy rates to remain unchanged for quite some time - at least till Q1 of FY25 - given the inflation prints in coming months will face upward pressure risks from the possible lower farm outputs owing to uneven rain experienced during monsoons," he said.
NSO collects the price data from selected 1,114 urban markets and 1,181 villages covering all states/UTs. During September, it collected prices from 99.8 per cent villages and 98.3 per cent urban markets.
Reserve Bank of India (RBI), which mainly factors in CPI inflation while arriving at its bi-monthly monetary policy, has been tasked by the government to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on the either side.
Earlier this month, RBI projected the CPI inflation to be at 5.4 per cent for the financial year 2023-24.