WPI inflation to seven-month high of 1.32% in September

New Delhi: Spiralling prices of food items, especially vegetables, pushed up the wholesale inflation to a seven-month high of 1.32 per cent in September and cements the likelihood that the Reserve Bank will continue with status quo on interest rates.

The Wholesale Price Index (WPI)-based inflation was at 0.16 per cent in August.

"The annual rate of inflation, based on monthly WPI, stood at 1.32 per cent (provisional) for the month of September, 2020 (over September, 2019) as compared to 0.33 per cent during the corresponding month of the previous year," government data showed on Wednesday.

The WPI-based inflation appears to be moving in sync with CPI-based retail inflation which shot up to an eight-month high of 7.34 per cent in September, mainly on account of rising prices of food items.

Although the RBI takes into account retail inflation while deciding the monetary policy stance, ICRA's principal economist Aditi Nayar said, "today's data (on WPI inflation) further cements the likelihood of an extended pause from the Monetary Policy Committee (MPC)."

Before recording an increase of 0.16 per cent in August, the WPI inflation was in the negative territory for four straight months -- April (-) 1.57 per cent, May (-) 3.37 per cent, June (-) 1.81 per cent and July (-) 0.25 per cent.

Inflation in food articles during September was at 8.17 per cent, as against 3.84 per cent in August, showed the data from the commerce and industry ministry.

Vegetables as a category had inflation of 36.54 per cent in September, potato price skyrocketed by 107.63 per cent from a year-ago period.

However, onions had deflation at 31.64 per cent and in fruits, the inflation was at (-) 3.89 per cent.

Prices of cereals came down with a negative inflation print of 3.91 per cent during the month, while, cost of pulses went up by 12.53 per cent.

In the manufactured products category, inflation during the month rose to 1.61 per cent, from 1.27 per cent a month ago, the government data said.

Among others, 'fuel and power' witnessed decline in prices with an inflation print of (-) 9.54 per cent. This category has been witnessing a decline in prices consistently since the beginning of this fiscal year so far as inflation for all the months from April-September are in negative territory.

Likewise, non-food articles in the WPI basket have witnessed deflation, with the latest print of (-) 0.08 per cent in September, showed the data.

The primary food inflation touched an eight-month high of 8.2 per cent in September 2020, with vegetables recording a distressing inflation of 36.5 per cent, despite a high base, Nayar said, adding, "the pace with which vegetable prices recede back to more normal levels will crucially guide the outlook for food and headline inflation in the near term."

She further added that despite the appreciation of the Indian rupee, the core-WPI inflation increased to a 16-month high 1 per cent in September 2020, with a fairly broad-based up move, and is set to double over the next quarter.

Retail inflation for the month of September spiked to an 8-month high of 7.34 per cent due to costlier foot articles, which is above the RBI's comfort level of 4 per cent with a bias of +/- on the either side, government data on Monday showed.