Wholesale Price Inflation continued to remain in the negative territory for the eleventh straight month, at -4.54% in September, but slightly higher than the -4.95% in August. The WPI data released on Wednesday indicates that the impact of a broad-based decline in global commodity prices still persists, while domestic producers’ are unable to increase prices.
In September, fuel and power inflation dropped even further to -17.71% in September, compared with -16.50% in August, reflecting the fall in global crude oil prices, official data showed.
Food inflation, however, slipped back to the positive territory after two months, touching 0.69% in September from -1.13% in the previous month, thanks to a spurt of 113.7% in onion and 38.6% in pulses, inflation. However, negative inflation in potato and the vegetable segments (-57.34% and -9.45%, respectively) kept a lid on the overall food inflation, while core inflation turned negative for seven successive months now.
The latest data came on the back of retail inflation touching 4.41% in September–compared with 3.74% in the previous month but well below the Reserve Bank of India’s expected forecast of 5.8% by January 2016, despite the diminishing base advantage–and industrial production growth scaling a 34-month high of 6.4% in August, in the strongest sign yet in this fiscal of a recovery in economic output.
Given that RBI Governor Raghuram Rajan has already “frontloaded” the rate cut by trimming the benchmark lending rate by a higher-than-expected 50 basis points late last month, many analysts don’t see any further easing measures by the central bank this fiscal, even though they reckon retail inflation would undershoot the RBI target for January.
The July WPI data has been revised marginally to -4% from -4.05% announced earlier, the data showed.
Although the impact of favourable bases for both the wholesale and consumer price inflation gauges has started to diminish from September onwards, analysts don’t see any sharp upward spiral in price pressure in the coming months. This is because global commodity prices continue to remain subdued and the on-going kharif harvest is expected to put a check on pulse and onion prices in the coming months, although some risks to food inflation from a deficient monsoon (14% drop in showers from the benchmark levels) still persist.
“WPI inflation will remain sub-zero in the third quarter before rising to 3-4% by March 2016 as the base effect dissipates for primary articles and fuels. While we expect core inflation to revert to the positive zone in the last quarter in the current fiscal, it is likely to remain subdued and print below headline WPI inflation in the fourth quarter of this fiscal,” said Aditi Nayar, senior economist at ICRA, a ratings agency.
Inflation in manufactured items stood at -1.73% in September, compared with -1.92% in the previous month.
The WPI data showed the build-up food inflation since March was 5.90%, compared with 11.76% a year before, while in manufactured products, the build-up was -0.39% since March, against 2.97% a year earlier. In fuel and power, the build-up between March and September was -6.6%, down from -0.37% a year earlier. On a month-on-month basis, the index levels gained in only five of the 11 sub-sectors in the non-food manufactured segment in September, compared with 6 in the previous month.
Analysts said higher prices of tradable goods could partly reflect the weakening of the rupee against the dollar in September, while continued negative inflation in sugar and textiles and disinflation in woods, paper, leather and rubber products reflect weak export demand. The country’s exports dropped for nine months in a row, having dropped almost 21% in August from a year before.