WPI inflation at 6-month high of 3.59% in October

In sync with retail inflation, wholesale inflation accelerates on the back of rising veggie prices

Wholesale price index (WPI)-based inflation was at a six-month high of 3.59 per cent in October, from 2.6 per cent the previous month.

As Consumer Price Index (CPI) inflation rose similarly (to 3.58 per cent, a seven-month high) in the month, this is likely to be a factor if the Reserve Bank of India (RBI) decides not to cut its policy rate at next  month’s review  to spur economic growth. 

Food inflation, led by onions and tomatoes and in fuels, pushed the WPI inflation; that in manufactured products showed a decline. This led to core inflation (manufactured items sans food products) remaining stable at 2.8 per cent. 

Inflation was higher than October’s only in April (3.85 per cent) in the financial year so far. Food inflation more than doubled to 4.3 per cent in October. For vegetables, at 36.61 per cent last month, against 15.48 per cent in September.

In the case of onions, inflation surged to 127.04 per cent, while tomatoes saw it jumping to 97 per cent. 

However, pulses continued to see deflation, at 31.05 per cent. Likewise in potatoes, deflation was 44.29 per cent and wheat at 1.99 per cent.

Inflation in the fuel and power segment rose to 10.52 per cent in October, from 9.01 per cent in September. Liquefied petroleum gas (LPG or cooking gas) was the major factor, its price rise being 26.52 per cent in October, from 20.75 per cent the previous month. Power rates rose on lower production.

Inflation in manufactured products dipped to 2.62 per cent, against 2.72 per cent in September.

“The sharper-than-anticipated uptick in WPI inflation reinforces our expectation of status quo in the coming monetary policy review,” says Aditi Nayar, principal economist at rating agency Icra. 

CARE Ratings’ Chief Economist Madan Sabnavis also says he does not expect the RBI to cut rates in its December review.

Nayar says the rise in global crude oil prices and in domestic vegetable prices would keep WPI inflation firm in November, too. Says Sabnavis, “We expect WPI inflation to be 3.5 to four per cent by the end of the financial year.”

Nayar says, “While CPI and the WPI inflation converged in October, this is likely to be temporary, with retail inflation expected to record a hardening in the remainder of FY18.”