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Wholesale inflation at 10.7% in September

By, New Delhi
Oct 15, 2022 12:13 AM IST

Wholesale inflation as measured by the wholesale price index (WPI) grew 10.7% in September, lower than the 12.4% reading in August.

Wholesale inflation as measured by the wholesale price index (WPI) grew 10.7% in September, lower than the 12.4% reading in August though it was the 18th consecutive month when the headline WPI value has been in double digits, official data released on Friday showed.

While wholesale price inflation might have peaked, it continues to be way above the comfort level. (ANI)
While wholesale price inflation might have peaked, it continues to be way above the comfort level. (ANI)

This means that while wholesale price inflation might have peaked, it continues to be way above the comfort level. The latest moderation in WPI is in contrast to the trend in seen in retail prices, as measured by the Consumer Price Index (CPI), which increased from 7% to 7.4% between August and September.

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To be sure, the WPI and CPI indices differ drastically in their mandate and composition. While CPI is designed to track change in prices facing an average household, WPI is designed to track producer prices in the economy. This means that CPI is far more sensitive to food prices (they have a weight of 39%) than WPI, where food items have a weight of just 24%. Similarly, WPI has a lot of industrial inputs and products, whereas CPI has elements such as household services which are not included in the WPI basket.

This difference notwithstanding, the latest WPI and CPI indices differ on the trajectory of food inflation. While the food sub-category for WPI saw a moderation in inflation from 9.9% to 8.1% between August and September, the food inflation sub-category of the CPI increased from 7.6% to 8.6% during this period. Once again, even the composition of the food baskets of the CPI and the WPI is not identical.

“WPI food prices increased by 0.3% m/m (month-on-month) as the rise in staples such as cereals and vegetables was offset in part by a sharp decline in fruit prices,” Rahul Bajoria, head of EM Asia (ex-China) Economics Research, Barclays, said in a note.

Where the WPI numbers show some relief is in the continuous moderation in prices of manufactured commodities, which have come down for the fifth consecutive month to 6.3%. To be sure, some of the moderation seen here could just be the base effect as the figure was already in double digits in September 2021. The latest WPI data also shows that fuel prices continue to a major driver of the headline WPI number, with inflation for the fuel and power category coming in at 32.6%.

“Given the continued fall in international commodity prices and favourable base effects, we expect WPI inflation to slow materially over the coming months. While moderation in WPI inflation offers some comfort, elevated inflation at the retail level suggests the need for the RBI’s monetary policy committee to maintain vigilance over evolving price trends. We expect the MPC to deliver another 35bp rate increase at the December policy meeting,” Bajoria said in his note.

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  • ABOUT THE AUTHOR
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    Roshan Kishore is the Data and Political Economy Editor at Hindustan Times. His weekly column for HT Premium Terms of Trade appears every Friday.

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