WPI inflation rises to 5.13% in Sept
Inflation based on wholesale prices spiked to a twomonth high of 5.13% in September, mainly due to hardening of food prices as well as rise in cost of petrol and diesel.
The wholesale price index (WPI) based inflation stood at 4.53% in August and 3.14% in September last year.
According to the government data released on Monday, food articles witnessed hardening of prices with deflation at 0.21% in September as against 4.04% in August.
Deflation in vegetables was 3.83% in September, compared with 20.18% in the previous month, indicating relative rise in prices.
Inflation in ‘fuel and power’ basket in September was 16.65%. Individually, in petrol and diesel it was 17.21% and 22.18%, respectively, and for liquefied petroleum gas (LPG) it was 33.51%.
Icra principal economist Aditi Nayar said while crude oil prices have cooled in the recent sessions, and the excise duty and value-added tax (VAT) cuts would provide some relief for fuel prices, the weaker rupee would continue to push up the WPI inflation in the current month.
“This remains a crucial risk for the consumer price inflation (CPI) trajectory as well. Moreover, the sharp narrowing in the disinflation for primary food items, led by cereals, fruits, vegetables, condiments and spices, and tea, may be a precursor to a rise in the retail food inflation in the ongoing month,” Icra’s Nayar said.
Data released last week showed retail inflation rose to 3.77% in September from 3.69% in the previous month. The Reserve Bank of India mainly takes into account retail inflation data while formulating monetary policy.
“The divergence in the extent of the uptick displayed by the WPI and the CPI inflation prints for September 2018 reflects the underlying difference in the composition of these two indices, with a smaller weight of food items and a larger weight of globally traded commodities in the WPI than the retail basket,” Nayar said.
The 5.13% WPI inflation is the highest in two months, and a higher inflation than this level was last seen in July at 5.27%.
Diesel price rose for the 10th consecutive day on Monday to wipe out all of the ₹2.50 per litre cut in rates announced earlier this month through excise duty cut and oil company subsidy.
The government had, with effect from October 5, cut excise duty on petrol and diesel by ₹1.50 per litre and asked state-owned oil firms to subsidise the fuel by another ₹1 a litre.
However, the retail selling price continued to rise on subsequent days.
While petrol price remained static on Monday, diesel rates were hiked by 8 paise per litre, according to a price notification of state-owned fuel retailers.
With this, diesel prices have in the last 10 days been hiked by ₹2.51 per litre.
This is the fastest increase in rates since oil firms implemented daily price revision in mid-June last year.
It now costs ₹75.46 per litre in Delhi, a shade higher than ₹75.45 a litre price when the government on October 4 announced the excise duty cut in 12 months.
Petrol costs ₹82.72 per litre and has witnessed an increase of ₹1.22 per litre since the October 4 decision.
Petrol on October 4 was priced at ₹84 per litre.
While in Delhi diesel rates are at their highest ever, in most the other states it is lower than the peak as some state governments had matched the centre’s move to cut excise duty and oil company subsidy by a similar cut in local sales tax or value-added tax (VAT).
Diesel in Mumbai costs ₹79.11 per litre, down from ₹80.10 on October 4. Petrol too in Mumbai is down from the peak of ₹91.34 per litre on October 4 to ₹88.18 on Monday.
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