India’s two main inflation gauges showed a continued easing, adding pressure on central bank Governor Raghuram Rajan to cut interest rates for a fourth time this year.

Consumer price inflation, the central bank’s benchmark, eased to 3.66 percent in August from a revised 3.69 percent -- below the central bank’s target of 6 percent by January for a 12th straight month. A separate Bloomberg survey had predicted the index would fall to 3.57 percent.

Wholesale prices fell 4.95 percent in August from a year earlier after slipping 4.05 percent in July, the Commerce Ministry said in a statement on Monday. The median of 32 economists in a Bloomberg survey had predicted a 4.4 percent decline.

Rajan has resisted growing pressure from the Finance Ministry to ease monetary policy, leaving rates unchanged in August ahead of a possible increase in U.S. borrowing costs this week. His next policy review is scheduled on Sept. 29.

"Prices remain contained both for food as well as core inflation which is lower compared to the previous month," said Anubhuti Sahay, an economist at Standard Chartered Plc in Mumbai. "Unless there is any external volatility, we would expect RBI to cut interest rates."

David Fuller's view

It would be extraordinary if India’s inflation had not fallen somewhat this year, given global disinflationary pressures.  However, approximately half of India’s current inflation comes from its inefficient food sector which is very dependent on the country’s June-September monsoon rainfall.  Unfortunately, this has been below normal for the second consecutive year, as this article also reports. 

Nevertheless, this is not a disaster and India remains one of the world’s fastest growing economies, thanks to an entrepreneurial culture and Prime Minister Narendra Modi’s leadership.  India’s Sensex Index surged for a year and a half before commencing a consolidation following a brief test of 30000 in early March.  This has been extended by the global stock market correction, creating an additional buying opportunity for long-term investors. 

There are a number of investment vehicles for India in the Funds section of the Chart Library, including the JPMorgan Indian Investment Trust which remains my largest personal long-term holding.  It reached a low of at least near-term significance on 24^th August and currently sells at a discount to net asset value of just over 10%, according to Bloomberg.