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This might dissuade the Reserve Bank of India (RBI) from focusing on growth at its monetary policy later this month.
In September, WPI inflation for onions rose to 322 per cent, against 244 per cent increase in August. As a result, food inflation soared to a three-year high of 18.4 per cent in September, against 18.2 per cent in the previous month.
At the retail level, food prices rose 11.44 per cent, against 11.06 per cent in August. “Consumer price inflation is correcting the huge gap we had witnessed in food items at the retail and wholesale levels in the previous months,” said Soumya Kanti Ghosh, chief economist at State Bank of India. In the past few months, CPI inflation had declined, while WPI had risen.
The gap between food inflation according to WPI and CPI was still high — 700 basis points — and this would lead to a further rise in retail inflation, Ghosh said, adding it could even touch double digits in the coming months. “There is a high possibility of that happening,” he said.
For the quarter ended September, WPI inflation stood at 6.13 per cent, against 4.83 per cent in the previous quarter. Average CPI inflation stood at 9.6 per cent, compared with 9.5 per cent in the quarter ended June.
Economists said there were high chances RBI would consider raising the repo rate in its monetary policy review at the end of this month. “We expect a rise of 25 basis points,” said D K Joshi, chief economist, CRISIL.
Ghosh said the central bank would consider raising the repo rate by 25 basis points to 7.75 per cent. At its mid-term policy review last month, RBI had raised the rate by 25 basis points to 7.5 per cent.
WPI inflation for manufactured items remained stood at 2.03 per cent in September, against 1.9 per cent price rise in the previous month. Core inflation — inflation for manufactured items sans food articles — for September stood at 2.1 per cent, against 1.94 per cent in August.Industry has been urging RBI to cut the policy rate to boost economic growth, which fell to a four-year low of 4.4 per cent in the quarter ended June 2013.
Wholesale prices of petrol rose 9.64 per cent in September, against 3.18 in August. During the same period, fuel inflation fell to 10.08 per cent from 11.34 per cent. Economists expect WPI inflation to exceed the seven per cent mark in the months ahead.
“This would start correcting only after December, around the time of the general elections, when food prices may come down,” said Ghosh.In September, while CPI-based inflation eased in cities, it accelerated in villages. For urban areas, it stood at 9.93, against 10.32 a month ago; for rural regions, it stood at 9.71 per cent, compared with 8.93 per cent in August.
Earlier, RBI had raised concern at the rising retail inflation, saying this was “eroding consumer and business confidence”.
