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Food, fuel drag inflation down

Overall food inflation (food articles plus manufactured food) slipped to 2% in September from 4.4% in August

Business Standard 

People rest next to stacked sacks of onions at a wholesale vegetable market in New Delhi. (Photo: Reuters)

Inflation based on the Price (WPI) fell in September, reversing a two-month trend.  At 2.6 per cent, it was nearly 60 basis points (bps) lower than the 3.2 per cent recorded in August. The decline was led by an over 240 bps fall in and a 100 bps dip in inflation. Core inflation was more or less stable.

WPI, which turned positive in July after four months of sustained decline, had been rapidly rising until August, led by higher food and inflation. In September, however, the trend saw a reversal.

Overall (food articles plus manufactured food) slipped to 2 per cent in September from 4.4 per cent in August, led by a sharp fall in inflation in cereals (at -0.1 per cent), (at -24.3 per cent) and vegetables (down 15.5 per cent, from 44.9 per cent in August). Meanwhile, manufactured food products inflation at 1.8 per cent was unchanged from the previous month. 

This year’s near-normal monsoon suggests agriculture production growth is likely to follow trend. That, coupled with last year’s bumper crop, will keep in check. Meanwhile, global is also forecast to stay benign, which will provide a further downside to domestic However, as our recent report, Normal rains, little gains, highlights the flipside to good monsoon and bumper crop of last year is that prices for most foodgrains have fallen and consequently reduced farmer profits. In fact, for several crops, prices and profit margins have continued to decline in recent months.

inflation eased slightly but stayed high at 9 per cent in September. During the month, the rupee weakened about 0.7 per cent on-month and 3.4 per cent on-year, while crude oil prices continued to rise rapidly — 7.5 per cent on-month and over 19 per cent on-year. Inflation rose in kerosene (up at 27.5 per cent in September, from 25.1 per cent in August), aviation turbine (12.2 per cent from 2.7 per cent), naphtha (15.4 per cent from 12.2 per cent) and liquefied petroleum gas (20.8 per cent from 5.3 per cent), but eased in petrol (15.8 per cent from 24.6 per cent), diesel (15.7 per cent from 20.3 per cent) and furnace oil (12.9 per cent from 20 per cent).

Core inflation (measured by the CRISIL Core Inflation Indicator, or CCII, which excludes the volatile food articles, metals and prices), climbed up a marginal 5 bps to 1.3 per cent in September from 1.2 per cent in August.

CRISIL tracker

First Published: Tue, October 17 2017. 01:07 IST
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