However, this is the second consecutive month in which the overall inflation has stayed in the single digit. It had remained over 10 per cent for five months till July.
Inflation was 8.51 per cent in August. The July figure, meanwhile, has been revised upwards to 10.31 per cent from provisional estimate of 9.97 per cent.
Besides, food inflation numbers released by the government today showed a marginal increase of 0.13 percentage points to 16.37 per cent for the week ended October 2, on higher prices of vegetables and milk.
Finance Minister Pranab Mukherjee has expressed concern over the rising prices, saying that managing inflation has been one of his biggest challenges.
The overall inflation numbers for September showed prices of primary articles (those found in raw form) -- food, non-food articles and minerals -- shot up by 17.45 per cent on an annual basis.
Meanwhile, Chief economic advisor Kaushik Basu has exuded confidence that inflation will moderate to 6 per cent by March end. "Inflation is virtually holding constant between 8.5-8.6 per cent... for the first time both the core CPI and the WPI are in single digit...Hopeful of year-end estimate holding at 6 per cent," he told reporters here.
Experts said they expect another 25 basis points hike in short term rates, when RBI comes out with its second quarter policy review on November 2.
However, the Reserve Bank Governor D Subbarao said in Chandigarh that the central bank would study the inflation data before deciding on further policy actions.
"We will study the de-segregate inflation data in the monetary policy review next month. Inflation figure would be one of the variables to be looked at during the review. I cannot speculate the stance of monetary policy," Subbarao said, when asked about the RBI's further rate hike action.
In a bid to curb consumer spending, the RBI has raised interest rates five times this year to tame rising prices.
HDFC Bank Chief Economist Abheek Barua said, "We expect another 25 bps hike in repo and reverse repo and after that RBI will pause its rate hike cycle. The rate of rise in prices is coming down gradually. Inflation in prices of manufactured items is easing, even as pressure on food items remain."
The government has maintained that inflation would come down to about 6 per cent by the end of this fiscal.
Mukherjee has said, "One of my biggest challenges is to control inflation but at the same time, I should not stand in the way of higher growth trajectory...I would not say I have failed. I have been able to reduce it from the peak it reached in December 2009 which it was as high as 20 per cent. Now it has been brought down to 16 per cent."
Meanwhile, the inflation data shows that on an annual basis, vegetables became dearer by 6.03 per cent, fruits by 12.03 per cent and milk by 24 per cent in September. Further cereal prices rose by 6.24 per cent and pulses increased by 5.07 per cent.
Even on month-to-month basis, onion prices surged by 16.21 prices. "Food inflation is driving the overall inflation numbers, Although prices of cereals and pulses are easing because of good monsoon, vegetables continue to increase because of seasonal effect," Crisil Chief Economist D K Joshi said.
This is evident also from the fact, that manufactured items did not show as much rise as raw food items. Even food products in manufactured category was up just 2.80 per cent in September. In fact, sugar prices declined by 4.36 per cent.
However, textiles prices are showing upward tendency. While cotton textiles turned dearer by 14.92 per cent in September year-on-year, man-made textiles prices were up 9.36 per cent.
