WPI inflation hits 5-year low of 2.38% on cheaper food prices

Food inflation slows to 5-yr low; hopes of interest rate cut revive

NEW DELHI: India’s wholesale inflation rate plunged to 2.38% in September, the lowest in five years, aided by a sharp drop in vegetable and petrol prices, data released on Tuesday showed, rekindling hopes that the Reserve Bank of India (RBI) will cut interest rates soon.

The more than one percentage point drop in wholesale inflation rates over August’s 3.74% should bring cheer to the NDA government, which rode to a landslide election victory promising to bring down prices of essentials as part of its poll pledge to usher in ‘Aachen din’ (good days).

“It is heartening to note that we have been able to bring food inflation under control. Growth in vegetable and protein prices that have been contributing to the recent increase in inflation rates have shrunk thanks to the steps taken by the government,” finance minister Arun Jaitley said.

Wholesale food inflation, a measure of how costly the platter has become, grew 3.52% compared to the previous month’s 5.15%. Wholesale vegetable prices fell 14.98% in September on a year-on-year basis, while onion prices plunged 58.12%.

“We are committed to continuing reforms in food markets that will improve supply responses and keep inflation low and stable. At the same time, fiscal consolidation and a new monetary policy framework will help bring down inflationary expectations. We are confident that soon we will be achieving a low and stable inflation rate,” he said.

It was also the lowest since 1.79% of October 2009, a period when demand for goods fell sharply battered by the worst

global recession in 80 years.

Besides, with crude oil prices falling to below $90 a barrel, expect retail diesel prices to come down further.

On Tuesday, the government cut retail petrol prices by more than ₹1 a litre.

Manufactured products inflation — a broad index to gauge price movements of industrial goods — was lower at 2.84% in September compared to August’s 3.45%, but still higher than last September’s 2.36%.

Retail inflation also eased in September to 6.46% year-on-year from 7.73% in the previous month, data showed last week, although that is still above the central bank’s target of 6% by 2016.

The RBI, which has maintained status quo in interest rate since January, will review its monetary policy on December 2.

The RBI primarily factors in the retail inflation while framing the monetary policy.