The WPI for September 2023 was pegged at 0.26 per cent.
The wholesale inflation, measured using the Wholesale Price Index, was expected to be at 1.92%, according to economists polled by Reuters.
Food prices, a key indicator went up to 9.47 per cent in September from 3.26 per cent in August, showed government data. Fuel and power deflated in September with prices falling over 4 per cent when compared to 0.67 per cent in the previous month.
Additionally, the annual rate of inflation for Primary Articles of WPI accelerated to 6.59 per cent as against 2.42 per cent in August.
Manufactured products’ inflation touched 1 per cent when compared to 1.22 per cent in August.The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: Primary Articles (22.6 percent of total weight); Fuel and Power (13.2 percent); and Manufactured Products (64.2 percent).
Food remains costly affair
Food prices have always played a significant role in shaping India’s inflation picture. The current consumer price inflation (CPI) basket assigns a weight of 46% to food, a figure that many argue needs to be revisited as consumption patterns evolve.
As significant portion of 1.4 billion people spend most of their income on food, India’s inflation index is heavily influenced by food prices.Experts had earlier indicated that a higher food inflation number could keep overall inflation from declining significantly.
Prices of key vegetables such as onion, tomato and potato have risen and a Crisil analysis recently showed the cost of a veg thali in India rose 11% on year in September. Concerns also persist regarding the impact of weather variations on inflation and economic stability.
The RBI in its latest bulletin said volatility in food prices remains a contingent risk even as recent easing in retail prices will help boost private consumption.
RBI’s stance
During the latest rate-setting panel meeting, the MPC left its inflation forecast for this fiscal year (FY25) unchanged at 4.5 per cent, even amid caution on food price trajectory that may hurt core inflation along with geopolitical tensions which pose a threat to any comfort on crude prices.
The central bank now sees inflation for Q2, Q3 and Q4 of this fiscal year at 4.1%, 4.8%, and 4.2%, respectively. In the August policy, the monetary authority had pegged the inflation readings at 4.4%, 4.7% and 4.3%, respectively. Inflation stood at 4.9% in the first quarter.
The inflation forecast for the first quarter of the next fiscal year is projected at 4.3%.
India’s food inflation has averaged 6.3% between June 2020 and June 2024, a central bank study published in August showed, compared to 2.9% in the previous four years. It eased slightly in July and August due to statistical base effects but is expected to have risen again last month.
The Reserve Bank of India-led Monetary Policy Committee (MPC) on Wednesday retained repo rate. Considering the balanced inflation and growth trends, Shaktikanta Das announced the MPC’s shift from “withdrawal of accommodation” to “neutral.” This change allows the MPC greater flexibility while maintaining focus on aligning inflation with the target without compromising growth.