Continuing the downward trend, retail inflation slipped to a four-month low of 4.87 per cent in October, mainly due to easing food prices and inched towards the Reserve Bank's target of 4 per cent, according to government data released on Monday.

The Consumer Price Index (CPI) based retail inflation fell to a three-month low of 5.02 per cent in September.

The inflation was recorded at 4.87 per cent in June.

The Reserve Bank's Monetary Policy Committee (MPC), in its October meeting, projected CPI inflation at 5.4 per cent for 2023-24, a moderation from 6.7 per cent in 2022-23.

The government has tasked the RBI to ensure the CPI inflation remains at 4 per cent with a margin of 2 per cent on either side. The central bank mainly factors in the retail inflation while arriving at its bi-monthly monetary policy.

Retail inflation has been on the decline after it touched a high of 7.44 per cent in July in the current fiscal.

As per the data released by the National Statistical Office (NSO), the inflation in the food basket was 6.61 per cent, marginally down from 6.62 per cent in September and 7 per cent in the year-ago month.

The inflation in the 'oil and fat' segment declined by 13.73 per cent, while it remained subdued in the case of vegetables, meat and fish, and 'light and fuel'.

Among states, the inflation was above 6 per cent in Odisha, Rajasthan and Haryana.

Inflation in states like Bihar, Gujarat, Karnataka, Telangana, Uttar Pradesh and Punjab ruled above the national average of 4.87 per cent.

The lowest inflation was witnessed in Chhattisgarh and Delhi.

On a national level, the retail inflation was 5.12 per cent in rural areas and 4.62 per cent in urban India.

Aditi Nayar, Chief Economist at Icra, said that while the uptick in foodgrain prices following an uneven monsoon has manifested in prices in October, higher prices of some vegetables like onions would be partly absorbed by the typical seasonal downtrend in many other vegetables, offering some respite.

"We expect the MPC to maintain a hawkish tone amidst a status quo on the rates and stance in its upcoming policy meeting. We see the earliest likelihood of a rate cut in August 2024, when a shallow rate cut cycle of 50-75 bps could commence," she said.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said the moderation in inflation provides some relief, especially as the core inflation has remained comfortable.

"However, we expect the trend of sub-5 per cent headline inflation to remain brief, with most of FY24 ahead likely to remain above 5 per cent.

"Overall, we continue to expect the MPC to remain on an extended pause phase in rates with liquidity being used as a more frequent tool to manage the stance," Bhardwaj said.

The price data are collected from selected 1,114 urban markets and 1,181 villages covering all states/UTs through personal visits by field staff of the Field Operations Division of NSO, Ministry of Statistics and Programme Implementation (MoSPI), on a weekly roster.

During October 2023, NSO collected prices from 99.8 per cent villages and 98.6 per cent urban markets.

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