India’s wholesale price index (WPI)-based inflation rose to a four-month high of 2.36% in October primarily due a spike in key food prices and an unfavourable base, data released by the commerce ministry showed on Thursday.
In October 2023, WPI inflation was (-)0.26%, and in September, it was 1.84%. The wholesale food inflation in October soared to double digits, coming in at 11.59%, the highest print in 28 months. This was mainly driven by a surge in prices of vegetables, oilseeds, and cereals.
According to Icra’s Chief Economist Aditi Nayar, food inflation alone pushed up the headline WPI print by as much as 63 basis points between September and October 2024.
Meanwhile, the inflation rate of ‘manufactured products’ increased to 1.5% in October, the highest rate in three months; while that of ‘fuel & power’ declined to a 14-month low of (-)5.79%.
On a sequential basis, prices of manufactured products rose for the second consecutive month, reflecting the rise in wholesale prices of manufactured food, textiles, basic metals and machinery. This may cause a further pass-through of prices to retail prices, and consequently may push up the core CPI inflation further, say analysts.
“The MPC statement, from the October meeting, had flagged the rise in international metal prices as a factor to monitor. However, we note that after a brief surge in October, prices of most metals and crude oil have fallen back in November so far, suggesting that the pressure on manufactured products WPI may moderate slightly,” Barclays said in a note.
Data released on Tuesday showed that core CPI inflation in October rose to a 10-month high of 3.7%; and going forward, it’s only expected to grow. According to economists, core inflation may touch 4% by January-February.
In October, out of 21 categories within manufactured (non-food) products, only four categories witnessed negative print on a YoY basis, while 17 categories witnessed positive print. Categories with highest inflation rates were other manufacturing (+15.6% YoY), beverages (+2.0% YoY), and wearing apparel (+1.9% YoY). Whereas, categories with lowest inflation were other non-metallic mineral products (-3.4% YoY), basic metals (-3.1% YoY), and metal products (-2.2% YoY).
According to ICICI Bank, global base metals prices have picked up in the recent month at 9.2% YoY, and this is likely to get crystallised in wholesale inflation print in the coming months. “Given recent increase in global energy and commodity prices, there is a case for higher WPI inflation in the near-term,” the bank said.
Economists say the evolving geopolitical condition needs careful monitoring, but with higher sowing better than last year, the arrivals of kharif crops is likely to be better this year. “Against this backdrop, we expect WPI to ease in Q4 in line with CPI provided oil and food shocks are not triggered. Any rate action by RBI is warranted only by Q4FY25,” said Jahnavi Prabhakar, economist, Bank of Baroda.