India's retail inflation rate moderated to 9.73 percent in September from the 10.03 percent in August, mainly by a marginal fall in fuel prices, according to the data released by the Ministry of Statistics and Program Implementation.  

The country's annual consumer price inflation (CPI) is still above the comfort levels set by the Reserve Bank of India. The CPI came down marginally as food price inflation fell to 11.6 percent in September from the 12.03 percent in August. The prices of vegetables rose 20.79 percent, those of oil and fats increased 18.41 percent and the price of sugar was up 17.51 percent.

The inflation for the rural areas decreased marginally to 9.79 percent in September, from 9.90 percent in August, while the urban retail inflation declined to 9.72 percent in September from 10.19 percent in August.  Inflation rates (final) for rural and urban areas for August 2012 stood at 9.90 percent and 10.19 percent, respectively. 

The prices of sugar, edible oils, pulses and vegetables continued higher in September, as sugar saw the highest price rise by 19.4 percent on an annual basis followed by edible oils at 18.54 percent.

The inflation figures in September did not fully reflect the steep hike in diesel prices announced by the government on Sept. 13, as various governments had reduced the fuel taxes.

Though there is an increased demand from the industry and markets to cut interest rates, analysts believe that current inflation rates are well above the RBI’s comfort levels. A Reuters poll this week forecast headline Wholesale Price Index (WPI) inflation accelerating to 7.7 percent in September following the government hike in fuel prices to tackle the trade deficit, Reuters reported.

The wholesale price index numbers are released on Monday and RBI uses the Wholesale Price Index to monitor the inflationary forces in the country. The Wholesale Price Index inflation for August was at 7.55 percent.  RBI’s next monetary policy review will be on Oct. 30.