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September Retail Inflation at 3.28 Percent; Unchanged From August

Primary contributors to September inflation are housing and fuels categories, which have hardened due to HRA effect on housing and global crude price effect on fuel prices.

Agencies

Updated:October 12, 2017, 6:59 PM IST
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September Retail Inflation at 3.28 Percent; Unchanged From August
Vendors wait for customers at vegetable stalls at a wholesale fruit and vegetable market in Mumbai on June 14, 2017. (Photo: Reuters/Danish Siddiqui)
New Delhi: Retail inflation came in at 3.28 percent in September, unchanged from August, despite softening of vegetable and cereal prices, according to government data.

The Consumer Price Index (CPI) or retail inflation stood at 4.39 percent in September 2016.

The Central Statistics Office (CSO) also revised downwards the August inflation to 3.28 percent from 3.36 percent.

The data revealed the overall food inflation moderated to 1.25 percent in September from 1.67 percent in the previous month.

The rate of price in vegetables softened to 3.92 percent (from 9.97 percent in August). On the other hand, the inflation print rose in the fuel and light category to 5.56 percent. It was 3.66 percent in August.

Among others, inflation in fruits, meat & fish, and prepared meals quicken during the month. Rate of price rise in pulses continued with deflationary trend at (-) 22.51 percent and eggs prices fell by 0.15 percent.

EXPERT VIEWS

Analysts polled by Reuters had expected retail inflation to edge up to 3.60 percent last month from 3.36 percent in August.

Economists surveyed by Reuters had forecast 2.4 percent growth in output compared with a revised 0.9 percent year-on-year increase in July.

COMMENTS

Rupa Rege Nitsure, Group Chief Economist, L&T Finance Holdings, Mumbai

Contrary to street expectations, CPI has fallen sequentially despite the fact that favourable base effect has unwound. This primarily reflects weaknesses in aggregate demand. Even services inflation has moderated marginally.

Primary contributors to September inflation are housing and fuels categories, which have hardened due to HRA effect on housing and global crude price effect on fuel prices. This means inflation trajectory remained well below the RBI target in H1, FY18.

Yet, the chances for rate cut look distant as IIP growth has accelerated to 4.3 percent, albeit due to a favourable base effect in capital goods and mining sectors.

In my opinion, IIP growth will not sustain at this level, as base effect will keep shifting. My IIP forecast was 5 percent - closest to the actual.

Hitesh Jain, Associate Vice President - Research, IIFL Wealth Management, Mumbai

There is no room or scope for further easing rates for at least 3-4 months. RBI may take a call in March since it clearly sees inflation scaling higher.

Rising energy prices and implementation of farm loan waivers aggravates the inflationary pressure. All this will basically impart upside risk to the baseline inflation trajectory.

The spike in inflation in August was basically due to a rise in vegetable prices and food commodities ahead of the festive season. Now we see some moderation in food prices.

There will be improvement in aggregate demand for commodities during festive season.

People also attributed the spike in retail inflation in August to GST. I think the picture has to evolve, because the government is still contemplating changes to GST.
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