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Expensive vegetables, high metal prices push WPI inflation to 1.32%

Together with CPI, it may restrain RBI from taking any further monetary easing measures

WPI inflation
.Inflation in tomatoes too rose to 99.2 per cent

The wholesale price index (WPI)-based inflation rate rose for the second month in a row in September to 1.32 per cent, from 0.16 per cent in the previous month, as vegetable prices spiked. 

Inflation in manufactured items also saw some uptick because of the rise in prices of some metals. 

Wholesale prices had remained in a deflationary phase for four months before August.

Though the WPI inflation appears to be smaller when compared with the retail inflation rate of 7.34 per cent in September, the broad trend remains the same in both indices. It was the less weighting of food items in the WPI — 15.26 per cent — compared to over 45 per cent in the consumer price index (CPI), besides composition of the indices, that made the inflation rate in the latter look steeply high.

 Against this backdrop, economists are of the view that the monetary policy committee (MPC) of the Reserve Bank of India (RBI) will maintain a pause on policy rates.

 “The data further cements the likelihood of an extended pause from the MPC,” said Aditi Nayar, principal economist, ICRA.

 Food inflation more than doubled to 8.17 per cent in September, from 3.84 per cent in the previous month, jacked up by vegetable and pulse prices.

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 Vegetable inflation rose five times to 36.54 per cent, against 7.03 per cent in the previous month. Within vegetables, the inflation rate in potatoes rose to 108 per cent, from 83 per cent.

 Inflation in tomatoes, too, rose to 99.2 per cent.

 However, onion prices declined 32 per cent, against 34 per cent. September was the fourth month in a row to see a decline in prices of onions. This may look surprising since the common man is witnessing a surge in onion prices. This is because the inflation rate is calculated year-on-year. While prices did fall in onions on the yearly basis, these showed an upward trend on a monthly basis. 

For instance, these rose by 58 per cent in September, against the levels of August.

 Sanjay Kumar, CEO & MD of Elior India, said the increase in wholesale food inflation is a cause for concern. “This is for two reasons. One is that it limits any more scope for intervention from the RBI in terms of reducing the repo rate any further. It also put a dampener on consumption because the tax-paying population is already under stretch due to job losses and the economic contraction,” he said.

Manufactured items saw inflation rising to 1.61 per cent, from 1.27 per cent. This was due to the rise in inflation in semi-finished steel and basic metals. Prices of diesel and petrol decreased; the inflation rate in liquefied petroleum gas declined, too.