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

Business Standard - - FRONT PAGE - INDIVJAL DHASMANA

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.

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 next mone­tary WPI-based in­fla­tion (% year-on-year) pol­icy re­view,” says Aditi Na­yar, prin­ci­pal econ­o­mist, 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 WPI in­fla­tion con­verged in Oc­to­ber, this is likely to be tem­po­rary, with re­tail in­fla­tion ex­pected to record a hard­en­ing in the re­main­der of FY18.”

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