Now wholesale prices jump up in Sep, WPI rises to 1.32% (Roundup)

Updated: Oct 14,2020 13:30 GMT

social social social social Now wholesale prices jump up in Sep, WPI rises to 1.32% (Roundup)

IANS

Tags: Business
New Delhi, Oct 14 (IANS) High prices of food products, primary articles and manufactured goods accelerated India's September wholesale inflation.

The annual rate of inflation, based on wholesale prices, rose to 1.32 per cent in September from 0.16 per cent in August, and from (-) 0.25 per cent in July.

On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen by only 0.33 per cent as against the corresponding period of the previous year.

"The annual rate of inflation, based on monthly WPI, stood at 1.32 per cent (provisional) for the month of September 2020 (over September 2019) as compared to 0.33 per cent during the corresponding month of the previous year," the ministry said in its review of 'Index Numbers of Wholesale Price in India' for September.

On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, increased 5.10 per cent from 1.60 per cent in August 2020.

The prices of food items remained at elevated levels with a rise of 6.92 per cent from 4.07 per cent reported for August.

On commodity and sub-segment basis, potato prices increased by 107.63 per cent in September against 82.93 per cent during August.

Overall, vegetable prices in September rose 36.54 per cent against a rise of 7.03 per cent in August.

Similarly, pulses became dearer by 12.53 per cent last month from 9.86 per cent in August.

On a YoY basis, expenses on food items increased at a faster rate of 8.17 per cent from 7.54 per cent in the corresponding period of last year.

The sub-segment of vegetable prices in September rose 36.54 per cent against the decline of 19.3 per cent in the same month a year ago.

The cost of the fuel and power category declined (-) 9.54 per cent against a rise of (-) 6.68 per cent YoY.

Furthermore, the cost of the manufactured products category rose 1.61 per cent against a fall of (-) 0.42 per cent YoY.

The data trajectory assumes significance as it fans further concerns over stagflation, an economic trend which marks rising inflation and falling gross domestic product (GDP).

On Monday, another key inflation data point -- Consumer Price Index -- showed that a massive rise in food prices spiked India's September retail inflation to 7.34 per cent from 6.69 per cent in August.

Though non-comparable, India had recorded a retail price inflation of over 3 per cent in the corresponding period of previous year.

The Reserve Bank of India, in its latest monetary policy review, had maintained the key lending rates on account of rising retail inflation.

"Similar to the trend displayed by the CPI, the WPI inflation overshot our estimate for September 2020 and rose to a seven-month high 1.3 per cent driven by a quickening in the prices of food items," said Aditi Nayar, Principal Economist, ICRA on WPI inflation.

"The primary food inflation ratcheted up to an eight month high 8.2 per cent in September 2020, with vegetables recording a distressing inflation of 36.5 per cent, despite a high base. The pace with which vegetable prices recede back to more normal levels will crucially guide the outlook for food and headline inflation in the near term."

According to Sunil Kumar Sinha, Principal Economist, India Ratings and Research: "WPI inflation is still benign and expected to remain so despite its upward trajectory. but retail inflation continues to remain outside the comfortable zone of RBI."

"Although RBI is attributing the supply side disruption to be the key reason of high retail inflation and expects it to cool down to 4.3 per cent in 1QFY22, India Ratings and Research believes RBI will go for a pause on policy rate in the remainder of FY21 but will continue to take other measures for orderly functioning of financial markets."

Sanjay Kumar, CEO & MD, Elior India, said: "The increase in wholesale food inflation is a cause of concern, for two reasons. One is that it limits any more scope for intervention of the RBI in terms of reducing the repo rate any further. At the other end, it force-puts a dampener on consumption because of the fact that the tax-paying population is already under stretch due to job losses and the economic contraction."

"Hence, a probably more aggressive approach to ramping up of both government public spending as well as taking an aggressive stance on fiscal policy by enabling consumption. The recent announcement by the government with regards to compensation laws will hopefully spur some demand."

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