The latest WPI data is also reflective of persisting weak demand conditions in the economy, analysts said
Wholesale price inflation remained in the negative territory for a full year but deflation pressure eased a bit with the relevant index firming up to -3.81% in October from -4.54% in September, due to some pressure in the food segment. Besides muted commodity prices, the latest WPI data is also reflective of persisting weak demand conditions in the economy, analysts said, adding that WPI inflation is likely remain in the negative zone in the near term.
Food inflation remained in the positive territory for the second month in a row with October reading at 0.3% as compared to 0.69% in September, thanks to a spurt of 85.66% in onion-and 52.98% in pulses-inflation. However, negative inflation in potato and the rice segments (-58.95% and -3.40%, respectively) kept a lid on the overall food inflation, while core inflation remained negative for the eight successive month, at -2%.
WPI, it may be noted, was on a downward spiral from October last year – from 2.38% in September, the inflation rate dropped to 1.66% in October, 2014 and remained in negative zone thereafter. The prediction of continuing negative inflation in the near term is despite the emergent reversal of the base effect.
The government has been watchful of the price situation in relation to food items and has taken measures to keep the prices of essential food items like pulses in control. The checks imposed on hoarders and imports of pulses is expected to ease the situation, officials said.
Fuel and power inflation index firmed up to 0.5% in October reflecting the increase in prices of some fuels such as aviation turbine fuel and high speed diesel. Minerals group inflation declined an annual 5% in October.
“(WPI is) broadly in line with our expectations. Today’s data print is unlikely to have a material impact on the RBI’s upcoming monetary review, with the central bank expected to hold rates unchanged in its December 2015 policy,” said Aditi Nayar Sr Economist, ICRA.