Retail inflation declined to a three-month low of 5.02 per cent in September, mainly due to easing food prices, according to the government data released on Thursday. The inflation has come back to the Reserve Bank of India’s (RBI) comfort level of below 6 per cent after a gap of two months. 

The inflation based on the Consumer Price Index (CPI) was 6.83 per cent in August 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. 

Commenting on the reading, Madan Sabnvis, the chief economist of Bank of Baroda, said: “Core inflation has come down further to 4.5 per cent, and there is moderation cross all categories with inflation being less than 5 per cent.”  

He, however, pointed out that rural inflation was higher than urban inflation at 5.3 per cent, while the latter was 4.7 per cent. The higher weight to food products caused this spike in inflation. 

The RBI mainly factors in retail inflation while arriving at its bi-monthly monetary policy. 

The country’s factory output, as measured by the Index of Industrial Production (IIP), has meanwhile come in at 10.3 per cent for August 2023. A year ago for the same period, the reading was at 0.7 per cent. Thus, the August reading is overstated due to the base effect and hence should be viewed against this backdrop. 

The data released by the National Statistical Office (NSO) showed that the manufacturing sector’s output increased by 9.3 per cent in August 2023. 

“This high growth in IIP corroborates with the buoyant PMIs and GST collections. The next two months should ideally see sustained growth if rural demand revives – this has been a lacuna so far,” said Mr Sabnvis. 

Mining production rose 12.3 per cent during the month under review. Power output grew 15.3 per cent. The IIP grew by 6.1 per cent in April-August 2023 compared to 7.7 per cent in the same period of 2022-23.