Producers’ inflation based on wholesale price index (WPI) remained in negative territory for 7th successive month as October headline recorded at (-) 0.52 per cent against (-) 0.26 per cent in September, Commerce and Industry Ministry reported on Tuesday.
On Monday, government reported that retail inflation based on consumer price index (CPI) was at four month low at 4.87 per cent. With both headline numbers showing a declining trend, the pause on policy interest rate is expected to continue for some more time.
“The negative rate of inflation in October 2023 is primarily due to fall in prices of chemicals and chemical products, electricity, textiles, basic metals, food products, paper and paper products, etc. as compared to the corresponding month of previous year,” the Commerce and Industry ministry said on Tuesday.
Inflation in food articles eased to 2.53 per cent in October. It was 3.35 per cent in the previous month. The fuel and power basket inflation was at (-) 2.47 per cent in October, against (-) 3.35 per cent in September. In manufactured products, the inflation rate was at (-) 1.13 per cent as against (-) 1.34 per cent in September.
On the latest WPI data, Rajani Sinha, Chief Economist with CARE, said that favourable base and downtrend in commodity prices for successive moths resulted in deflationary trend.
“The trend extended in October with WPI contracting by 0.5 per cent with continued annual deflation in manufactured products and fuel and power categories. However, sequentially, there was some uptick partly due to higher food prices led by cereals, vegetables and protein items,” she said.
Aditi Nayar, Chief Economist, Head, ICRA, attributed a sharp turnaround in the crude petroleum and natural gas print to a deflation.
Now, expectation is that the deflationary trend is at its fag end.
“The deflationary trend in WPI could end in the coming months with the support of favourable base fading away gradually and expectation of subdued commodity prices amid global demand weakness. However, for the full year, we expect WPI inflation to average below 1,” Sinha said.
According to Nayar, while global commodity prices, including that of crude oil, continue , the uptrend in domestic prices of most food items as well as an unfavourable base are likely to result in turnaround in the WPI to a marginal 0.1 per cent inflation in November (+6.1 per cent in November 2022), after a gap of seven months.
Thereafter, “ICRA estimates the WPI inflation prints to remain below 3 per cent in the remaining months of FY2024, amid expectations that commodity prices will remain at benign levels unless global demand outlook strengthens significantly,” she said.