WPI Inflation Slows To 0.16 Pc In Oct; Lowest In Three-And-A-Half Years

Retail inflation jumps to 16-month high of 4.62 pc in Oct

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NEW DELHI Wholesale inflation slipped to about three-and-a-half-year low of 0.16 per cent in October on account of a decline in prices of manufactured goods though food products remained dearer, government data showed on Thursday.

The previous low was in June 2016 when the Wholesale Price Index (WPI)-based inflation was a negative 0.1 per cent.

In September this year, the WPI-based inflation was at 0.33 per cent, while it stood at 5.54 per cent in October 2018.

The rate of price rise for food articles was 9.80 per cent during the month, while for non-food articles it stood at 2.35 per cent, showed the latest data released by the commerce and industry ministry.

The wholesale inflation in potato remained in the negative zone at 19.60 per cent (from -22.50 per cent in September).

However, for vegetables, the inflation jumped to 38.91 per cent in October from 19.43 per cent a month ago, while that for pulses, it remained elevated at 16.57 per cent as compared with 17.94 per cent.

For fruits, it eased to 2.72 per cent during the month as against 6.67 per cent in September. While wholesale inflation in manufactured products was (-)0.84 per cent in October 2019.

“The sequential dip in the WPI inflation in October 2019 was led by core items, fuel and power, minerals, and crude petroleum and natural gas, whereas inflation for primary food and non-food articles, and manufactured food products recorded an uptick,” said Aditi Nayar, economist at ICRA.

Among other articles, in the WPI basket, the inflation for the fuel and light category declined further to -8.27 per cent

Rahul Gupta, currency research head, Emkay Global Financial Services, said, “The data in wholesale prices signals that there is still lack of demand in segments such as manufacturing, metals, and chemical products. While only a surge in vegetable prices led to a rise in WPI from the market forecast. The continued weakness in WPI along with slowing growth will induce the RBI (Reserve Bank of India) to cut repo rate again in December.”

The retail inflation for the month hit a 16-month high of 4.62 per cent due to soaring prices of food articles, including fruit and vegetables, according to data released by the Ministry of Statistics and Programme Implementation on Wednesday.

The RBI takes into account the retail inflation data to decide on its bi-monthly monetary policy announcement, which is due early next month.

Retail inflation jumps to 16-month high of 4.62 pc in Oct

Retail price based consumer inflation spiked to 16-month high of 4.62 per cent in October on costlier food items, reducing the headroom for a rate cut by the RBI in its monetary policy due next month.

The inflation based on Consumer Price Index (CPI) was 3.99 per cent in September and 3.38 per cent in October 2018.

The earlier high was reported in June 2018 when the retail inflation print was recorded at 4.92 per cent.

The inflation in the food basket spiked to 7.89 per cent in October 2019 as against 5.11 per cent the preceding month, showed the data released by the Central Statistics Office under the Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday.

During the month, inflation in vegetables spiked to 26.10 per cent from 5.40 per cent in September, while for fruits it jumped to 4.08 per cent from 0.83 per cent.

Likewise, the prices of cereals, meat and fish, eggs grew at faster pace of 2.16 per cent, 9.75 per cent and 6.26 per cent, respectively. For pulses and related products, retail inflation rose to 11.72 per cent.

However, the prices of fuel and light category continued to witness downward move at (-) 2.02 per cent as against (-) 2.18 per cent a month earlier, showed the data.

The retail inflation during October remains above the RBI’s comfort level of 4 per cent.

Aditi Nayar, economist at Icra said, looking ahead the pace of normalisation in vegetable prices will be the key driver of the trend in food inflation over the next few months.

“Overall, the CPI inflation may continue to print higher than 4 per cent in the remainder of FY2020, complicating policy choices in light of the slowdown in economic growth momentum.

“The sharp uptick in the CPI inflation in October 2019 has contrasted with the industrial contraction recorded in September 2019. In our view, the extent to which the Q2 FY2020 GDP growth reading eases further from the 5 per cent recorded in the previous quarter, will influence the MPC’s decision on whether to cut rates further, and by how much, in the December 2019 policy review,” she said.

Rahul Gupta, Head of Currency, Emkay Global Financial Services, said this sharp rise was especially due to uptick in food prices amid erratic monsoon.

“Despite rising inflation, we expect (the) RBI to continue its easing cycle on the back of sluggish growth and weak core inflation and cut repo rate at December meeting,” Gupta said.


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