WPI hits 7-month high of 1.3% in September
Data issued by the industry department on Wednesday showed that wholesale food inflation shot up to 8.17% in September from 3.84% in August with significant rises in the prices of potato (107.63%) and pulses (12.53%).Updated: Oct 15, 2020, 08:15 IST
India’s wholesale price inflation accelerated in September touching a seven-month high of 1.3%, mostly because of rising food prices, which may force the Reserve Bank of India (RBI) to opt for a prolonged pause on policy rates.
Data issued by the industry department on Wednesday showed that wholesale food inflation shot up to 8.17% in September from 3.84% in August with significant rises in the prices of potato (107.63%) and pulses (12.53%).
Wholesale price inflation was driven by a quickening in the prices of food items, similar to the trend displayed by retail inflation, said Aditi Nayar, principal economist at Icra Ltd.
“The disaggregated data did not provide much comfort regarding the inflation outlook, and today’s data further cements the likelihood of an extended pause from the monetary policy committee (MPC) of the RBI. 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 said.
Retail inflation, data for which was issued on Monday, had accelerated to a four-month high at 7.34% in September, staying well above the RBI’s targeted range for the sixth straight month, as food prices rose.
On Friday, the reconstituted MPC kept policy rates unchanged as inflation continued to remain high even as it took a slew of measures to reduce the borrowing cost of credit. RBI governor Shaktikanta Das said inflation will ease gradually towards RBI’s target in the fiscal third and fourth quarter. “Our analysis suggests that supply disruptions and associated margins/mark-ups are the major factors driving up inflation. As supply chains are restored, these wedges should dissipate,” Das said. “Meanwhile, aggregate demand remains subdued and there is evidence of considerable resource slack. Large excess supply conditions characterise foodgrain and horticulture production and the outlook for agriculture is bright. Crude prices remain range-bound,” he said.
“The MPC has hence decided to look at the current inflation hump as transient and address the more urgent need to revive growth and mitigate the impact of Covid-19. This has provided the space for continuing with the accommodative stance with forward guidance as set out in the MPC’s resolution,” said the RBI governor.