Retail inflation declines to 6.46%, touches 2-year-low

Even the prices of protein based items like milk and milk products and eggs fish and meat showed a reduction in September over August and July. For the six-month period, CPI inflation averaged 7.7 per cent compared with 9.6 per cent last year.

Eggs, fish and meat were down 6.4 per cent compared to 7.7 per cent in August while milk and milk products were down 11.1 per cent compared to 11.7 per cent the previous month.

Fruits prices also showed a significant slowdown to 22.4per cent in September compared to 24.3 per cent in August while prices of cereals came down much faster at 6.42 per cent compared to 7.4 per cent in August, indicating that the slightly lower monsoon deficit has not yet impacted food prices.

It is perhaps too early to say whether the back of food inflation has been broken. According to Care Research’s chief economist Madan Sabnavis, “The signs of decline in inflation should be interpreted with caution,” adding that “The distinct moderation in CPI inflation is admittedly a good sign for the economy; however this has been on the back of a high base effect last year.”

The high-base cushion will be available in October and November too, said Mr Sabnavis but cautioned that the impact of this year’s sub-normal and regionally skewed monsoon is likely to show from next month onwards.

Aditi Nayar, senior economist, ICRA, said “Advance estimates for food production indicate substantial shortfalls in production of various kharif crops in 2014 as compared to 2013, such as pulses (14 per cent), coarse cereals (14 per cent) and oilseeds (12 per cent), which remains a key risk for month-over-month hardening of food prices in the near term.