India CPI inflation eases in September, driven by fall in food prices

Consumer prices in India eased during the month of September, driven by fall in food prices and positive base effects. In Aug-Sep alone, inflation has softened by a cumulative 180 basis points, down from a peak of 6.1 percent in July.

Food inflation decelerated to 4.1 percent from 5.8 percent, helped by a fall in vegetables (-7.2 percent y/y, compared to 1 percent in Aug), pulses (14 percent vs 22 percent), fruits and protein prices (meat, eggs, fish etc.). Disinflation here is expected to sustain on the back of a normal monsoon, favourable spatial reach and increase in sowing area coverage. Easing food inflation overshadowed a modest pickup in fuel and service categories.

Fading base effects and upward adjustment in retail fuel prices underpinned the fuel price index, which edged up to 3.1 percent from Aug’s 2.5 percent. Service sector inflation firmed up to 4.5 percent y/y vs Apr-Aug average of 4.1 percent.

WPI inflation meanwhile is likely to tick up to 3.9 percent y/y in Sep from 3.7 percent month ago, on fading base effects. The gap between CPI and WPI inflation has narrowed sharply in recent months, with the prints likely to converge in Oct-Nov.