India's Sept retail inflation seen at 7.4% - Deutsche Bank

MUMBAI (Reuters) - India's headline retail inflation is expected to rise to a five-month high of 7.4% in September, with the risk of going higher if the momentum of food and vegetable prices picks up further in the rest of the month, Deutsche Bank said.

"Our nowcasting exercise reveals that CPI inflation is tracking around 7.4% yoy in September vs. 7.0% yoy in August," chief India economist Kaushik Das said in a note dated Sept. 20.

India's retail inflation has stayed above the Reserve Bank of India's upper tolerance range of 6% for eight straight months through August.

The foreign bank expects inflation to average at 7% in October-December and 6.4% in January-March, with a full-year average projection of 6.9%, higher than the RBI's 6.7% estimate.

The RBI's inflation target stands at 4%, with 200 basis points tolerance on either side.

Deutsche Bank expect core inflation to be 6.1% in September and to average 6% for the current financial year, with risks biased to the upside given that services-related inflation momentum could gain traction in the coming months.

(Reporting by Dharamraj Lalit Dhutia; Editing by Savio D'Souza)