India's retail inflation drops to 5 pc in Sept, below RBI's upper band

After climbing to a 15-month high of 7.44% in July this year, headline inflation has now come down to the Reserve Bank of India (RBI)'s upper tolerance level of 6%.

The data released on Thursday revealed that food inflation declined to 6.56% in September from 9.94% in August.

Several market watchers and analysts had predicted an easing of retail inflation in the month of September attributing it to the declining trend in food and vegetable prices. The food items account for nearly half of the consumer price index.

During the month of September, rural inflation was higher than urban inflation.

As per the official data, cereals and products inflation stood at 10.95% in September this year. Fruits and vegetables inflation were 7.30% and 3.39% respectively during the month under review. Edible oils inflation declined 14% in September.

"With uneven monsoon and several states reporting a possibility of a sub-par kharif crop, the food inflation outlook remains grim. While 5% (inflation rate) is reached, the task downhill to the 4% will remain a challenge in the near future," said Anitha Rangan, Economist, Equirus.

The Reserve Bank of India (RBI) has projected headline CPI inflation at 5.4% for FY24.

In its October 6 monetary policy, the RBI kept the policy repo rate unchanged at 6.5%. This was the fourth time in a row that the Monetary Policy Committee (MPC) of the RBI maintained the status quo on the key interest rate.