Wholesale inflation cooled to 10.7% in September, aided by base effects

India’s Wholesale Price Inflation (WPI) dropped from 12.4% in August to 10.7% in September, the lowest level in at least a year, with food price rise easing to 8.1% from 9.9% in August and manufactured products inflation moderating to 6.3% from 7.5% a month earlier.   

September marks the eighteenth month in a row that Wholesale Price Inflation has stayed more than 10%. However, this is the fourth straight month that wholesale inflation has eased after hitting a record high of 16.63% in May, with June reporting 16.23%. July’s wholesale inflation rate has been revised upwards from 13.93% estimated earlier to 14.07%. 

Wholesale price inflation surged to new high of 15.9% in May

While the Wholesale Food Price Index eased to 8%, vegetables inflation zoomed to 39.7% in September from 22.3% in August, with potato inflation surging to 49.8%. Cereals inflation also inched up from 11.8% in August to 11.9%, with wheat inflation hitting 16.09%. 

Inflation in fruits, however, cooled to 4.55% from 31.7% in August, as did manufactured food products inflation which dropped to 3% from 5.6% the previous month. Price rise in eggs, meat and fish more than halved from 7.9% in August to 3.6% in September.   

The latest WPI reading should be interpreted cautiously, suggested Bank of Baroda chief economist Madan Sabnavis, as many of the numbers are derived from the high base of September 2021 when wholesale inflation was 11.8%. 

“Hence, even when global commodity prices were increasing, the WPI, though elevated, did witness a decline,” he said. For instance, fuel inflation is high at 32.6% more due to the base effect as diesel and petrol prices have remained unchanged for a few months. 

Inflation in primary articles eased from 14.9% in August to 11.7% in September and declined 1.3% month-on-month, the sharpest moderation among major product categories, fuel and power inflation dropped to 32.6% from 33.7% in August, but recorded a month-on-month uptick of 0.13%. 

“Inflation in September, 2022 is primarily contributed by rise in prices of mineral oils, food articles, crude petroleum & natural gas, chemicals & chemical products, basic metals, electricity, textiles etc. as compared to the corresponding month of the previous year,” the Office of the Economic Advisor in the Commerce and Industry Ministry said. 

Mr. Sabnavis expects wholesale inflation may drop below 10% from October onwards, thanks to the higher base between October 2021 and March 2022 when the rate was over 13%. However, food prices spiking again is the ‘only threat’ to this possibility. 

“Pressure will remain on the food side as output of rice, pulses and vegetables would be lower this season due to a combination of lower area sown and some damage caused due to the prolonged monsoon. Oilseeds inflation is now negative, but with output expected to be lower, can show a reversal,” he explained.