India's retail inflation drops to 5-month low of 4.35% in Sep; Aug IIP up 11.9%

India's retail inflation fell to a five-month low of 4.35% in September from 5.3% in August as food inflation declined sharply, according to the data released by the government on Tuesday.

Food inflation is on a continuous decline and further eased to 0.68% in September from 3.11% in August.

Inflation, as defined by the consumer price index (CPI) stayed within the Reserve Bank of India's (RBI) tolerance band of 2%-6% for the third consecutive month.

Within the food prices, Vegetables registered a de-growth of -22%, while food and beverages segment grew 1.01%.

Inflation in the fuel and light category remained elevated at 13.63%.

The Central bank in its latest monetary policy meeting lowered the inflation forecast at 5.3% for the current financial year from an earlier estimate of 5.7%.

"Today's inflation print supports the RBI's calibrated and gradual approach towards liquidity normalisation. Moreover, it is likely to take some pressure off the bond market, where the 10-year yield has firmed up after the RBI suspended its G-SAP last week. "While the picture seems rosy for now on inflation, we might not be out of the woods yet with global stagflationary concerns rising," said Sakshi Gupta, Senior Economist at HDFC Bank.

"Energy shortage and rising oil prices are already having ripple effects on production and prices of other commodities. This remains an upside risk for inflation once the base effect wears off from December," Sakshi Gupta said.

Meanwhile, the index of industrial production (IIP) for the month of August surged 11.9%, showed data by ministry of statistics and programme implementation (MoSPI). IIP grew 11.5% in the month of July.

The mining output during the August month grew by 23.6%, while manufacturing sector surged 9.7%.

Meanwhile, the electricity generation in August grew 16%. Industrial production has been surging for the past few months mainly due to low-base of last year.