In September, two months after reaching a 15-month high, India's retail inflation slowed even further. Its retail inflation, or CPI, fell to a three-month low in September, owing to lower vegetable costs. Furthermore, inflation fell below the RBI's upper tolerance zone of 2%-6%.

According to figures issued by the Ministry of Statistics on Thursday, retail inflation in India increased by 5% in September, compared to 6.83% in August.

Inflation is expected to fall in September, according to industry analysts, due to a dramatic drop in the prices of certain food goods, such as vegetables and edible oils.

Despite a positive fall in inflation, CPI remained above 4%, a level that the country's central bank has indicated is critical before reducing rates. Food inflation, one of the key components of the consumer price basket, also fell last month. Food inflation increased by 6.56% in September, compared to 9.94% in August.

For the past two months, high vegetable costs have been the primary driver of inflation. In response to soaring inflation, the government even banned rice exports and raised onion tariffs.

Vegetable inflation fell to 3.39% in September from 26.14% the previous month. Cereal inflation fell to 10.95% in September, down from 11.85% in August. It has prohibited wheat exports since last year.

Experts in the industry emphasized the importance of components such as fuel, light, vegetables, edible oil, and so on. Cereals, pulses, and spices, on the other hand, have continued to climb in price.

"The thrust is from fuel and light, which is negative (government lowering LPG prices), and vegetables, which fell to 3.4% from 26% in August." The reduction was also aided by edible oil. Cereals (11%), pulses (16%), and spices (23%), on the other hand, continue to grow at a rapid pace," stated Anitha Rangan, Equirus Economist.

She also hinted at a bleak picture for food inflation, citing the unpredictability of the monsoon and numerous states predicting the prospect of a subpar kharif crop. 

"While 5% is reached, the task downhill to the 4% will remain a challenge in the near future," she went on to say.

The decrease in fuel inflation was caused by the introduction of a subsidy for low-income households to 300 rupees per cylinder, up from 200 rupees announced in August, in order to curb inflation.

Despite a significant fall in inflation, the RBI has stated that a target of 4% and a print of less than 6% may not be sufficient as a prerequisite for lowering lending rates. In September, the central bank held its key lending rate constant for the fourth consecutive policy meeting.