WPI inflation rises to 8-month high of 1.48% on pharma, metal prices

Food inflation eases but onion, potato and pulse prices firm up

The wholesale price index-based (WPI-based) inflation rate rose for the third straight month to an eight-month high of 1.48 per cent in October from 1.32 per cent in the previous month.

Economists said the WPI data enforced the case for the status quo in the Reserve Bank of India’s policy rates.

Unlike its consumer price index (CPI) counterpart, pressure did not come from food items in general.

These were manufactured products, particularly pharma and metals, that fuelled the WPI inflation rate.

Economists attributed it to a rise in demand due to festivals and after unlockdown was announced for more sectors from September onwards.

The food inflation rate in the WPI came down to 6.37 per cent in October from 8.17 per cent in the previous month.

It rose to 11.07 per cent from 10.68 per cent over the same period in the CPI.

“The rising retail food inflation rate and the declining wholesale food inflation rate are a nightmare for policymakers,” said Devendra Pant, chief economist at India Ratings.

Aditi Nayar, principal economist at ICRA, said the WPI data did not reveal any information that would build the case for a rate cut in December.

“In our view, the Monetary Policy Committee is likely to stay on hold in at least December if not in February too,” she said.

However, within the overall wholesale price food inflation rate, individual items behaved differently.

The WPI inflation rate in vegetables fell to 25.23 per cent from 36.54 per cent. However, onions saw prices increasing in October after a continuous fall for the previous four months. The rate for onions stood at 8.49 per cent in October against a deflation (fall in prices) rate of 31.64 per cent in the previous month. Prices of potatoes continued to double in October over those of the same month in the previous year. 

The inflation rate here rose to 107.70 per cent in October from 107.63 per cent.

Pulses also saw the inflation rate rising from 12.53 per cent in September to 15.93 per cent in October.

Fuel and power saw the deflation rate rising to 10.95 per cent in October from 9.54 per cent in the previous month.

For liquefied petroleum gas (LPG), the inflation rate fell to 2.86 per cent from 3.19 per cent over this period. Both petrol and diesel continued to see a fall in prices.

It was manufactured items, which have the highest weighting of 64 per cent in the WPI, that saw the inflation rate rising to 2.12 per cent from 1.61 per cent over this period.

Pressure came from pharmaceuticals, medicinal chemicals, and botanical products, which witnessed the inflation rate going up to 3.31 per cent from 2.70 per cent. However, the inflation rate in October was less than the 3.40 per cent in August.

The rate for basic metals rose to 5.32 per cent from 3.35 per cent over the period while mild steel and semi-finished steel saw it increasing to 4.85 per cent from 4.06 per cent.

As a result, the core inflation rate (that relates to non-food, non-fuel manufactured products) spiked to 1.7 per cent from 1 per cent during this period, led to a large extent by the base effect, said Nayar.

Pant said an increase in the core inflation rate suggested improvement in demand conditions after Covid-related lockdown was lifted.

“However, it will be too early to term this a general recovery. A large part of this is due to festival-related demand,” he said.