WPI inflation hits six-month high in September but stays in the negative

New Delhi: India’s Wholesale Price Index (WPI) inflation rose in September but remained negative for the sixth consecutive month. But at -0.26%, it is now close to positive territory, thanks to fuel, power and manufactured product prices.

WPI inflation was -0.52% in August, -1.36% in July, -4.12% in June, -3.48% in May and -0.92% in April, data released by the commerce and industry ministry on Monday showed. A year ago, it stood at 10.55%. Economists polled by Reuters had estimated WPI inflation to rise at 0.5% in September.

Though fuel and power prices declined in September, the contraction was slower than in the previous month. It was -3.35% in September, compared with -6.03% in August.

In manufactured products, the inflation stood at -1.34% in September, compared with -2.37% in August.

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Meanwhile, easing vegetable prices led to wholesale food inflation falling to 1.54% in September from 5.62% in August.

“Deflation in September 2023 is primarily due to the fall in prices of chemical and chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of previous year,” an official statement said.

Food inflation slowed during September. To put things in perspective, food inflation stood at 3.35% in September, compared with 10.6% in August.

Vegetable inflation was -15% during September, after surging 48.39% in August.

“The decline in WPI for September can be attributed to a substantial deceleration in food prices and the continued year-on-year contraction in fuel prices and manufactured products prices,” said Rajani Sinha, chief economist at CareEdge Ratings.

“With the support of high base fading, some uptick in WPI inflation numbers could be seen in the second half of the fiscal year. However, with weak China demand, other global commodity prices are expected to remain benign and that should keep WPI inflation low,” Sinha added. She expects WPI inflation to average below 1% in FY24.

Overall, the segments and commodities that saw the most price rise during the month, apart from fuel and power, were basic metals, transport equipment, fabricated metal products, machinery and equipment, and rubber and plastic products.

“Some of the groups that witnessed a decrease in prices are food products, motor vehicles, trailers and semi-trailers, electrical equipment, leather and related products, chemical and chemical products, etc., in September 2023 as compared to August 2023,” the official statement added.

Consumer Price Index-based inflation eased for the second consecutive month in September to 5.02%, aided by a slower rise in vegetable prices and an overall decline in food inflation, from 6.83% in August.

The latest data for retail inflation, which was released on 12 October, falls within the Reserve Bank of India’s (RBI) target range of 2-6%. The RBI, however, has a medium-term target to bring down retail inflation to 4% by 2024.

Wholesale inflation is expected to enter positive territory in the coming months due to rising crude prices and likely threats to kharif harvest by skewed rainfall.

Earlier in October, the RBI had left the repo rate unchanged at 6.5%. Retail inflation has remained below 6% mark since March 2023, even dropping to a 25-month low of 4.3% in May, before rising again in June due to surging food prices, which have since last month stabilized.