Analysts in a Reuters poll had predicted annual inflation at 4.5%.
SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM
"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."
"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."
"Renewed inflationary pressures along with any signs of a slowdown in growth (due to global supply disruptions) could put the central bank in a tight spot yet again. But this time, the inflation scales could be heavier."
RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE
"The scale of moderation in the September CPI inflation was along expected lines, providing transient relief. The bulk of the pullback owes to base effects and administrative steps (lower import duties on edible oils etc.), notwithstanding which, core inflation outpaced the headline to stay firm at 5.8% year-over-year."
"We expect the downdrift to last for another couple of months, likely slipping below 4%, before reversing higher."
"Beyond the near-term relief, delayed rains pushing up staples (vegetables), pass-through of high energy/coal prices, rising input prices, service sector reopening pressures, and receding base effects, are likely to buoy headline CPI back above 5.0% yoy in the March 2022 quarter."
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURGAON
"While the extent of the fall in the YoY CPI inflation to 4.35% in September 2021 from 5.3% in the previous month is considerable and higher than our forecast, it has been driven primarily by food items, and to a small extent, housing."
"Other sub-sectors recorded flat or higher inflation reading in September 2021, which is a concern given the looming risk of rising energy, metals and logistical costs."
"The solid month-on-month uptick of 0.5% for clothing and footwear in September 2021 is a hint of some revival in domestic demand."
"In our view, the MPC will choose to continue to ignore supply-side risks to inflation, especially if they emanate from a global surge in commodity prices, on which monetary policy has little impact, and change the stance only after a durable domestic demand revival emboldens producers to raise prices."
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
"India's headline CPI print for September dropped sharply to 5.35% yoy from 5.3% in August, aided by the high statistical base effect. This would likely be music to RBI's ears which has just dropped its FY22 forecast from 5.6% to 5.3%."
"We expect another month of rather low inflation in October before the headline number starts picking up once again as the base effect turns unfavourable, especially from December."
"Even if RBI's forecast comes true, headline inflation would still remain at uncomfortable levels and our expectation of monetary policy normalisation timeline remains unchanged."
"We expect the central bank to move from a subtle hint of banking sector liquidity contraction (as evidenced from the August and October monetary policy meeting) to a stronger action in December and eventually to policy rate hike during 2Q22."
MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI
"Price pressure remain contained and surprised pleasantly, helped by base effects and a drop in food prices."
"Core CPI inflation also picked up marginally to 5.99% on a spike in oil prices and high corporate input costs. We maintain inflation is likely to average a tad lower than RBI's newly revised 5.3% for FY22."
"Going ahead, while favourable base effect and managed food inflation will see inflation going down, supply-side bottlenecks, higher energy and commodity inflation and high pump prices would pose a countering upside pressure on inflation."
RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI
"While industrial growth has just reached the pre-pandemic level, CPI inflation has eased primarily due to a favourable statistical base effect."
"Future trajectories of both industrial growth and retail inflation depend on how demand scenario pans out in the festive season. "
"Also, no official statistics have correctly captured the output and job losses in the unorganised sector. Considering these factors, I think the MPC's decision to keep a status quo in the 8th Oct policy was prudent."
GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI
"Supported by high base effect and across the board cooling of food inflation, September inflation print fell below 4.5% for the first time in five months."
"While the moderation of inflation for September is encouraging, higher energy and elevated vegetable prices in October may lead to a short reversal in trend for food inflation before the seasonal easing kicks in due to Kharif crop arrivals."
"We see risks of sticky core inflation prints through the year amid the pass-through impact of higher energy prices and higher intermediate input prices caused by supply disruptions in China. We expect FY22 CPI inflation at 5.4% with a marginal upside bias."
PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI
"September CPI outcome was as per expectations but we remain watchful of sustainability of emerging price pressures such as crude oil crossing USD 80/bbl and excess rains."
"The RBI believes that slack in the economy will limit the pass through of external cost pressures and foresee sustained disinflation in food, which is why they project benign headline inflation in the coming months."
"However, core CPI is likely to be above comfort (i.e. more than 5%) as firms use the recovery to make up for lost revenue."
RAJANI SINHA, CHIEF ECONOMIST & NATIONAL DIRECTOR - RESEARCH, KNIGHT FRANK INDIA, MUMBAI
"CPI inflation was expected to drop in Sep 2021, with the base effect kicking in. Nevertheless, it comes as a relief for the policymakers especially at a time when economic growth is just about gathering momentum."
However, high core inflation and fuel inflation remain a cause of concern. With global economic growth gathering momentum, there could be further upward pressure on commodity prices and the central bank would be wary of that. But there is unlikely to be any change in policy rates in the current year."
SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI
"September's CPI inflation at 4.35% is slightly lower than our expectations. A favourable base effect, along with moderation in some of the food items, as well as housing, helped in lowering the print."
"The RBI had revised its Q3FY22 estimate lower to 4.5% and today's print lends strength to the estimate. From the inflation perspective, there is little reason for the central bank to change the policy rate or liquidity stance, given the more recent rhetoric."
UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
"The September inflation surprised on the downside, led largely by lower food inflation. Overall H2FY22 average inflation trajectory now gets revised down by 20bps to 5%."
"However, we continue to remain wary on the supply side bottlenecks, surging crude oil prices and the global energy crisis and the related pass through to retail inflation."
(Reporting by Rama Venkat, Vishwadha Chander, Chandini Monnappa, Nallur Sethuraman and Anuron Kumar Mitra in Bengaluru; Editing by Aditya Soni)