WPI inflation slows to 3.57%; good monsoon cools veggie prices

Wholesale inflation eased to 3.57 per cent in September, reversing its seven-month uptrend, as good monsoon helped cool food prices, prompting the industry to demand interest rate cut to boost economic activity.
The wholesale price index-based inflation, reflecting the annual rate of price rise, stood at 3.74 per cent in August. In September 2015, WPI inflation was (-)4.59 per cent.
Yesterday, the official data had showed retail inflation falling to 13-month low of 4.31 per cent in September.
After the release of WPI data, industry chambers gave accolades to the Reserve Bank for the 0.25 percentage point reduction in interest rate last week.

"It can be said that the anti-inflationary supply side measures of the government have been successful and rising inflation has been brought under control. In this context, the RBI governor needs to be congratulated for lowering rates in anticipation of a benign inflationary outlook," CII said.
Wholesale inflation had been on a rise since February this year.

During September, WPI inflation in vegetables witnessed deflationary pressures and was recorded at (-) 10.91 per cent. Inflation in this category had scaled a high of 28.45 per cent in July.
This was aided by inflation for onion, which was at (-)70.52 per cent.

Pulses inflation continued to rule high at 23.99 per cent in September, according to the Commerce Ministry data.
Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 73.31 per cent. Prices of fruits rose 14.10 per cent during the month.
Overall, the food inflation basket showed good moderation with inflation at 5.75 per cent in September, as against 8.23 per cent in August.
Ficci said good monsoon and government action helped in abating the price level and indication are there that prices will remain benign.
ICRA Principal Economist Aditi Nayar said the pass through of higher global prices of commodities into domestic prices, as well as an unfavourable base effect for some sub-groups, pushed up WPI inflation.

"Based on the expected trajectory of food prices, commodity prices and exchange rates, we expect WPI inflation to rise further in February 2017, before easing marginally in March 2017," Nayar said.
As per data, WPI inflation in vegetables, at (-)32.32 per cent in January, saw deflationary pressure for the fifth consecutive month. This was helped by a substantial price fall in onions, which stood at (-)28.86 per cent.
Pulse inflation moderated to 6.21 per cent, from 18.12 per cent in December. Potato prices recorded sharp fall at (-)0.20 per cent, from 26.42 per cent in the previous month.
Rate of price increase in egg, meat and fish was 3.59 per cent during January.

Inflation in manufactured items saw some uptick at 3.99 per cent compared with 3.67 per cent in December.
While the rate of price rise in sugar was 22.83 per cent, for fibres it was 15.18 per cent, and 25.44 per cent for minerals.
In its policy last week, RBI retained the benchmark interest rate and changed its stance from 'accommodative' to 'neutral', indicating that there will not be any rate cut in the near term.
The RBI, which looks at retail inflation for framing monetary policy, projected it to remain below 5 per cent in the January-March quarter but said that hardening of global crude oil prices and volatility in exchange rates could put upside pressure in the next financial year.

Inflation, it said, will be in the range of 4-4.5 per cent in the first half and 4.5-5 per cent in the second half of 2017-18.