Price stability: What’s good for the near-term is great for the long-haul

Government data released on Monday shows that consumer price inflation in September eased to an over eight-year low of 1.54%, slipping below the Reserve Bank of India’s (RBI) 2-6% target band for the second time in 2025.

The last time this reading was lower was in June 2017. Food items in the index’s basket aided the cool-off, with their prices falling 2.28% last month, their fourth-straight month of decline. As India’s GST slashes took effect only in late September, the full effect of that consumption stimulus is expected to show up in October.

To be sure, there’s also a favourable statistical base at play in this year-on-year gauge. So price levels could escalate as that effect wears off in subsequent months.

Thankfully, the economy’s external vulnerability is not a source of anxiety, with Gaza visibly headed for peace and global oil prices expected to go by the usual dynamics of demand and supply more than West Asian geopolitics.

Inflation imported via oil tankers is that much less of a risk. In addition, India has received above-normal rainfall this year, which should help keep food prices low.

All this should be music to RBI’s ears. It is price stability, after all, that grants it the policy space needed to help the economy accelerate its expansion. An internally stable currency is good for long-range economic planning. That it enables the easing of credit when needed is best seen as a near-term bonus.