WPI inflation rises to 1.32% in September on costlier food prices

Wholesale price-based inflation (WPI) rose to a seven-month high of 1.32 per cent in September 2020, higher than 0.33 per cent in same month last year. The bump up in WPI comes on the back of costlier food prices. In August 2020, the WPI had touched 0.16 per cent.

The latest WPI print is significant as it is for the second straight month that it is showing positive reading after being in negative territory for four consecutive months April (-)1.57 per cent; May (-)3.37 per cent; June (-)1.81 per cent; and July (-)0.58 per cent.

Food articles inflation during September 2020 stood at 8.17 per cent as against 3.84 per cent in August, official DP data showed. Vegetable prices inflation was as high as 36.54 per cent and potato prices saw 107.63 per cent on a year on year basis.

Manufactured products inflation in September stood at 1.61 per cent from 1.27 per cent in August 2020.

Policymakers are now guided by the movements in retail inflation and not by the wholesale price index based inflation.

Commenting on the latest WPI print, Madan Sabnavis, Chief Economist, CARE Ratings, said that inflation for manufactured goods has started increasing in the last four months and this is a positive sign. “It is good for industry which is looking for a change in fortunes which have been downbeat in the past signifying loss of purchasing power. This is hence a positive sign. We have also seen that some global prices especially of metals have started moving up due to the China factor,” he said.

Aditi Nayar, Principal Economist, ICRA, said the primary food inflation ratcheted up to an eight-month high of 8.2 per cent in September, with vegetables recording a distressing inflation of 36.5 per cent despite a high base. The pace with which vegetable prices recede back to more normal levels will crucially guide the outlook for food and headline inflation in the near term, she said.

Rupee appreciation

Despite the appreciation in the rupee, the core-WPI inflation increased to a 16-month high one per cent in September 2020, with a fairly broad-based upmove, and appears set to double over the next quarter, Nayar said.

Sunil Kumar Sinha, Principal Economist, India Ratings, said that WPI inflation is still benign and expected to remain so despite its upward trajectory. but retail inflation continues to remain outside the comfortable zone of RBI.

“Although RBI is attributing the supply side disruption to be the key reason of high retail inflation and expects it to cool down to 4.3 per cent in 1QFY22, India Ratings and Research believes RBI will go for a pause on policy rate in the remainder of FY21 but will continue to take other measures for orderly functioning of financial markets,” he said.

COMMENT NOW