Unlike its retail price counterpart, wholesale price inflation fell to an eight-month low of 7.45 per cent in October, after showing signs of a surge in September when it touched 7.81 per cent from the 7.55 per cent estimated provisionally in August. This is despite the fact that the full direct impact of the rise in diesel prices came in October.
The August figure has now been revised to 8.01 per cent, the highest so far in this financial year, showed an official statement issued on Wednesday. This figure could be compared to the September data once the final figures for the sixth month of 2012-13 come next month. And, it raises doubt over the provisional figures, as these are being revised so sharply. Inflation was 9.81 per cent in October 2011.
As industrial growth again fell into negative territory in September and wholesale-price inflation declined in October, the Reserve Bank of India may now have more room to cut policy rates. Industry chambers have asked for this but economists said the central bank would look at some more figures before deciding.
Inflation in diesel shot up to 14.6 per cent in October from 8.94 per cent in September; the prices were raised from the middle of September by Rs 5 a litre, so the full impact did not come in the data of that month. Diesel inflation was 0.48 per cent in August.
Part of the easing of inflation is also due to the high base of last year. If calculated month-on-month, the picture would not be as rosy. “Nine of the 11 sub-groups recorded an increase in the index levels relative to the previous month, which partly reflects the pass-through of the diesel price hike,” noted Aditi Nayar, senior economist, Icra.
There was a decline in fuel inflation from 11.88 per cent to 11.71 per cent in October, which could be attributed to the base effect. However, on a sequential basis, inflation increased 0.85 per cent. “This shows the full direct impact of the diesel price hike announced in September,” said an analyst.
However, taking a year-on-year calculation as is done traditionally, food inflation eased to 6.62 per cent in October, down from 7.86 per cent the previous month. It showed a higher rate of decline in the wholesale price index (WPI)-based inflation compared to consumer price index (CPI)-based inflation.
CPI showed food inflation falling from 11.62 per cent in September to 11.43 per cent in October, while the WPI index showed food inflation declining by 1.24 percentage points to 6.62 per cent.
The monsoon revival in August has eased the pressure on build-up of food prices, a trend also manifested somewhat in the CPI inflation, said a YES Bank report. CPI inflation as a whole rose 9.75 per cent in October from 9.73 per cent in September, while WPI inflation rose. This shows retailers are raising prices much higher than at the wholesale market, an analyst said.
The impact of price rise was negated to some extent by a stronger rupee in October, which helped in a sequential correction in prices, noted YES Bank. In October, the rupee touched as high as 51 a dollar, in what was described as a post-reforms rally. However, it weakened again in November and closed at 54.88 a dollar yesterday.
Manufactured products inflation, which RBI keeps a close tab on, eased to 5.95 per cent, from 6.26 per cent in September and 6.36 per cent in August.
Core WPI inflation (provided by manufacturing, excluding food items) registered a moderation from 5.6 per cent (year-on-year) in September to 5.2 per cent in October, said Shubhada Rao, chief economist, YES Bank. “The moderation in sequential momentum for (the) core was driven by a decline in prices for import-heavy items like basic metals and a moderation in price pressures for other commodities like leather, chemicals and other metal products,” she added.
The Index of Industrial Production contracted 0.4 per cent in September after another fall in August. RBI had said it might look at cutting the policy rates sometime in the last quarter of 2012-13.