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India inflation falls to 5-year low in September

October 14, 2014

NEW DELHI (AP) — India’s benchmark inflation rate fell to a five year low of 2.4 percent in September as food and vegetable prices dropped, the Commerce Ministry said Tuesday.

Wholesale price inflation was 3.7 percent in August and 7.1 percent in September last year.

India has suffered chronically high inflation. But the lower level of price increases, if sustained, could pave the way for the central bank to cut interest rates next year to boost economic growth.

The Commerce Ministry data released on Tuesday said the index for the food articles group declined by 1.4 percent due to lower prices for tea, fruits and vegetables, maize, poultry chicken and fish.

India’s recently established retail inflation index rose 6.5 percent in September, its slowest increase on record.

HSBC said in a report that the sharp deceleration in food inflation even with a weak start to monsoons this year showed that Indian government’s efforts, which included close monitoring of wholesale markets and supplementing local supply with imports, had helped contain price pressures.

“Apart from food, softer commodity prices and stable exchange rates have dampened fuel inflation. In addition, tight monetary and fiscal policy conditions have also contributed to the disinflation,” the statement said.

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