Consumer inflation cooled to 4.31 per cent in September, from 5.05 per cent in August, amid softening food prices.
Food inflation was 3.88 per cent last month, slower than 5.9 per cent recorded in August as prices of vegetables declined.
Prices of vegetables declined 7.21 per cent year-on-year. However, price of pulses rose 14.33 per cent year on year while that of sugar surged 25.77 per cent.
Easing inflation gives more room to the Reserve Bank of India to cut rates again by the end of this year, say analysts.
Analysts see rate cut of up to 50 basis points this fiscal year, which ends on March 31, 2017.
The recently formed Reserve Bank of India Monetary Policy Committee, under new Governor Urjit Patel, cut rates by 25 basis points to 6.25 per cent in a surprise move earlier this month, after inflation hit a five-month low in August.
Another rate cut by the RBI would support government efforts to boost economic growth to above 8 per cent.
RBI’s next rate review is due on December 7. The RBI has softened its stance on the timeline for meeting its inflation goal and lowered the real interest rate target, giving it room to cut rates further.