Wholesale price inflation eased marginally in September to 3.6 per cent from 3.7 per cent in August due to a cooling off of food prices, data released by the Ministry of Commerce and Industry showed.
Inflation in the food category eased to 5.75 per cent in September from 8.23 per cent in August.
The slowdown in the growth of the WPI comes at a time when India’s retail inflation also eased sharply. Growth in the Consumer Price Index stood at 4.3 per cent in September, the slowest in more than a year, down from 5.05 per cent in August. This shows that the Reserve Bank of India was correct in cutting rates in its latest policy review, according to experts.
“Food prices have reduced during the month led by an easing of prices in the important category of pulses and vegetables,” Rishi Shah, Economist at Deloitte India said. “The effect of lower prices at the wholesale level was also seen at the retail level with the trends broadly in line. As such, inflation has declined due to the sufficient rains and some supply side management by the authorities.”
The slowdown in the food category had a significant impact on the primary articles segment, inflation in which was at 4.8 per cent in September, down from 7.5 per cent in August.
“The RBI was clearly correct about its rate cut,” Rajiv Kumar, Senior Fellow at the Centre for Policy Research said. “The government’s response in the last few months to food inflation has been quite good. Inflation in both the WPI and CPI was driven by food, and the government did a good job in controlling this. The RBI has been smart and needs to remain ahead of the curve going forward. More rate cuts are required to spur investment, and the RBI should go ahead and surprise the markets on occasion.”
Inflation in the fuel and power category, however, accelerated in September to 5.6 per cent from 1.6 per cent in the previous month, mainly driven by high-speed diesel.
“Inflation in energy and manufactured products did move up but is unlikely to be a cause of concern as global demand still remains subdued,” Mr Shah added. “However, fuel prices are likely to see some rise in the coming prints but the increment is likely to be capped at manageable levels.”
Manufacturing inflation quickened marginally to 2.5 per cent in September from 2.4 per cent in the previous month.
