WPI inflation eases in Sep as food prices dip

Wpi-based inflation fell to 10.66% even as manufactured items-based inflation saw marginal uptick

NEW DELHI: India’s wholesale price index (WPI) based inflation eased for the fourth consecutive month to 10.66% in September due to a sharp contraction in food prices, even as manufactured items based inflation picked up marginally.

Data released by the industry department showed while food inflation contracted 4.69% in September from a 1.29% dip a month ago, manufactured products inflation rose to 11.41% from 11.39% in the preceding month. With crude oil price hovering around $80 per barrel, fuel inflation remained elevated at 24.81% during the month, easing from 26.09% in August.

Among food items, potato (-48.95%), onion (-1.91%) and fruits (-1.27%) contracted, while prices of pulses rose 9.42%. Among manufactured items, prices of basic metals (26.71%), textiles (16.81%) rose sharply.

Data released on Tuesday showed India’s retail inflation eased to a five-month low of 4.35% in September on sharply decelerating food inflation, providing comfort to the central bank, which kept policy rates unchanged for the eighth time in a row last week to support a nashowever, cent economic recovery.

In its latest bi-monthly monetary policy review last week, the Reserve Bank of India seemed more comfortable about the path of inflation than it was in August, despite the recent ris in global commodity prices. The central bank has cut its retail inflation forecast for this fiscal to 5.3% from 5.7% earlier.

“Going forward, the inflation trajectory is set to edge down in Q3:2021-22, drawing comfort from the recent catch-up in kharif sowing and likely record production. Along with adequate buffer stock of foodgrain, these factors should help to keep cereal prices range-bound. Vegetable prices, a major source of inflation volatility, have remained contained in the year so far and are likely to remain soft, assuming no disruption due to unseasonal rains. Supply-side interventions by the government in the case of pulses and edible oils are helping to bridge the demand-supply gap; the situation is expected to improve with kharif harvest arrivals,” RBI’S monetary policy committee said in its statement.

The MPC, however, observed that pressures persist from crude oil prices, which remain volatile over uncertainties on the global supply and demand conditions. “Domestic pump prices remain at very high levels. Rising metals and energy prices, acute shortage of key industrial components and high logistics costs are adding to input cost pressures. Weak demand conditions, are tempering the pass-through to output prices. The CPI headline momentum is moderating with the easing of food prices which, combined with favourable base effects, could bring about a substantial softening in inflation in the near term,” it added.

The International Monetary Fund (IMF) on Tuesday, however, raised its inflation forecast for India to 5.6% for this fiscal from the 4.9% estimated in April, citing growing inflationary risks worldwide.

IMF said policymakers need to walk a tightrope between acting patiently to support the recovery and at the same time preparing to act quickly if inflation expectations show signs of de-anchoring.

“While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery. Central banks should chart contingent actions, announce clear triggers, and act in line with that communication,” it added.

Aditi Nayar, chief economist at ICRA Ratings said while the core inflation was stable at an elevated 11.1% in September, the month-on-month uptick of 0.6% reveals the underlying pressures related to prices of commodities and logistics. “After four months of consecutive moderation, we expect the WPI inflation to rise in October, and remain in double-digits in Q3 FY22,” she added.