Inflation at wholesale level slows to 2.6% in September

Correction in vegetable prices is primary driver, says rating agency ICRA

A labourer carries bags of rice over his back at a wholesale food grain shop in the Agricultural Produce Marketting Committe (APMC) yard in Bangalore on August 27, 2013. India's finance minister insisted August 27 the government could afford a vast new food programme for the poor despite growing concern about public finances which drove the rupee to a new record low. Under the plan, which still needs to be approved by the upper house, some 800 million people would receive 5 kilograms of cheap grain every month. AFP PHOTO/Manjunath KIRAN

Inflation at the wholesale level cooled to 2.6% in September due in large part to a slowdown in the increase in food prices, according to official data released on Monday.

Growth in the Wholesale Price Index slowed in September from 3.24% in August. Inflation in the primary articles category slowed to 0.15% in September from 2.66% in August.

Within this, inflation in the food articles segment slowed drastically to 2.04% from 5.75% over the same period. Inflation in the overall food group, which combines the food category in the primary articles segment and the manufactured food category as well, slowed to 1.99% in September from 4.41% in August. “The correction in vegetable prices was the chief driver of the decline in primary food inflation to 2.0% from 5.8%,” ICRA said in a note.

“A favourable base effect aided the moderation in inflation for fuel and power, despite the recent rise in prices of petrol, diesel, ATF and other fuels.” Inflation in the fuel and power segment slowed to 9.01% in September from 9.99% in August.

The crude oil and natural gas segment in the primary articles category saw prices contracting 11.5% in September and August, compared with a contraction of 10.8% in July.

‘Crude fuel index’

“Initial data has placed the index for crude petroleum at 55.6 for September 2017, only 1% higher than [in] June 2017, despite the 17% increase in the average price of the Indian crude oil basket in rupee terms [in the] period,” ICRA added.

Citing this, the rating agency said inflation for September 2017 could subsequently be revised higher. Inflation in manufacturing accelerated to 2.72% in September from 2.45% in the month of August.

“We see a moderation in the rate of inflation led by easing of prices in case of food articles,” Pankaj Patel, President of FICCI said. “Even the retail inflation numbers released earlier showed some softening in case of food prices. Overall, inflation remains within RBI’s indicative trajectory and this is an encouraging sign.”

“In the recently announced monetary policy review, the opportunity was lost as far moderation of interest rate is concerned, however, given the moderation in both CPI and WPI inflation, the RBI should resume the rate easing cycle in its next monetary policy announcement to give a fillip to demand, ” Chandrajit Banerjee, Director General of CII said.