Vegetable price declines cause retail inflation to fall to 5%.

According to data provided by the National Statistical Office on Thursday, consumer price inflation in India, which is based on the Consumer Price Index (CPI), dropped to a three-month low of 5.02% in September after remaining above the 6% threshold for two consecutive months. The consecutive drop in the price of vegetables, especially tomatoes, and cooking gas (LPG), along with the base effect, were the key causes of the retail inflation’s sharper-than-anticipated reduction.

When compared to September of last year, retail inflation in August 2023 was 6.83%, down from 7.41%. A 42-month low of 4.5% was reached in September for core inflation, which excludes the volatile components of food and fuel, signaling a general lessening of underlying pricing pressures.

The inflation print was unaffected by a surge in crude oil prices that started in mid-September because retail petrol prices stayed constant. However, the Israel-Hamas conflict has sparked new worries about commodity prices around the world.

In September, the veggies index, which has a 6% weight in the CPI basket, fell 15.8% month over month, the fastest rate in 33 months. The index for tomatoes in the category of vegetables fell by 64.9% month over month, the largest pace in at least nine years. Due to the introduction of new products onto the market in September, tomato prices that had dramatically increased in July due to supply problems were sharply adjusted.

The sequential decline in the fuel and light index, which reflected the decrease in LPG prices in the final week of August, was 3.9%. The price of LPG every 14.2-kg cylinder had been reduced by Rs 200 by the Centre on August 29. In the CPI basket, the index is weighted at 6.8%.

Inflation based on the Consumer Food Price Index (CFPI) was able to moderate in September to a 3-month low of 6.56% thanks to a decline in tomato prices, but the moderation was halted as the cost of other important food items increased consecutively.

In addition to housing, the costs of the other three core-miscellaneous items—pan, nicotine & intoxicants, and apparel & footwear—all increased significantly.

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