The Wholesale Inflation for October has surged to 3.59% to a six-month high, driven by faster rises in prices of food and fuel products, after registering a fall in the previous month, government data showed on Tuesday. The Wholesale Inflation in September fell to 2.40% from 3.24 % in August. India’s annual wholesale price inflation last month increased to 3.59 percent from a year earlier from a provisional 2.60 percent in September. Wholesale food prices in October rose 3.23 percent year-on-year, compared with a 1.99 percent rise a month earlier, the data showed.
Meanwhile, the Consumer Price Index (CPI) for October has accelerated to a seven-month high of 3.5% from a year ago, mainly driven by higher prices of housing, fuel, pan, tobacco and intoxicants, after going down in the previous month.
The food inflation for October was recorded 1.9%, higher than September’s 1.25% and August’s 1.52%. The price of food shot up mainly due to unexpected rains, which destroyed crops. Similarly, rural inflation rose to 3.3% from September’s 3.15% and August’s 3.22%, and urban inflation has gone up to 3.81% as compared to 3.44% in September and 3.35% in August. According to economists, rising commodity prices globally and a new pay revision for government employees may have led to the rise in inflation.
Some analysts expect India’s decision on Friday to slash tax rates on 178 items such as chocolates and detergent powders to 18% from 28% could marginally lower retail inflation in coming months, Reuters reported.
“There is, however, a low likelihood of a rate cut by the RBI in the immediate term,” said Aditi Nayar, an economist at ICRA, an Indian arm of the rating agency Moody’s, adding that inflationary expectations could remain high in the second half of the fiscal year that ends in March.
This uptick in prices reduces further chances of a rate cut by the Reserve Bank of India in its monetary policy review meeting on December 6. The Reserve Bank had kept the repo rate unchanged in its latest monetary policy meet at 6%, given the predictions of rising headline inflation. The central bank kept the policy stance neutral with the objective of limiting the medium-term target for CPI of 4% within a band of plus/minus 2%, while supporting growth.