What are the September inflation numbers hinting at?

The retail inflation rate, gauged by Consumer Price Index (CPI) in August grew 3.99 per cent in September as against growth of 3.28 percent in August 2019 and 3.70 per cent in September 2018. Although the inflation data remained within Reserve Bank of India's (RBI) target level of 4 percent, but it was higher than the previous month data, indicating steeper rise in prices.

Food and beverage prices grew 4.70 per cent in September against growth in 2.99 percent in August. Inflation rate in cereals and products grew at 1.66 per cent in September compared to 1.3 percent in August while vegetables inflation stood at 15.40 per cent against 6.90 percent in August. Pulses and products recorded an inflation of 8.40 per cent against 6.94 percent in August.

On the other hand, inflation for household goods and services is on declining trend from January 2019 and also for transport and communications has declined in September 2019 to 0.8 per cent from 1.2 percent in August. This hints at weak demand conditions in the economy.

At the same time, the general inflation, gauged by Wholesale Price Index (WPI) shows a different picture where the rate is easing over the last many months. WPI in September grew at 0.33 per cent as compared to 1.08 per cent in August 2019 and compared to 5.22 per cent in September 2018.

The WPI data for food articles has declined to 7.47 per cent from 7.67 per cent in previous month. However, it has highlighted on the increase in rate of vegetables and pulses. Vegetable inflation grew at 19.43 per cent against 13.07 per cent in August, while, prices of pulses increased at 17.94 per cent compared to 16.36 per cent in August.

Finance Minister Nirmala Sitharaman has announced a slew of measures like eased foreign investment rules, concessions on vehicle purchases, lower corporate tax rate and also the government has been encouraging banks to make loans cheaper to revive economic growth. Moreover, the Reserve Bank of India (RBI) has lowered the interest rates in last two monetary policies to boost loans and revive investment. Yet, the markets are expecting another rate cut by the apex bank in the upcoming policy.