WPI inflation hits 4-month high of 2.4% in October

India’s wholesale inflation, as measured by the Wholesale Price Index (WPI), rose to a four-month high of 2.4% in October, according to data released by the Union ministry of commerce and industry on Wednesday, mirroring the spike in retail inflation, and also caused by the same underlying factor — higher food prices.

Sequentially, the WPI print was 0.97%, the highest in six months.

Although an increase in the WPI reading for October was expected, the actual number has surprised analysts as wholesale inflation exceeded a projection of 2.3% by a Bloomberg poll of economists. This rise in October was preceded by a moderation in the last three months.

A disaggregated analysis of the WPI data shows that a spike in the prices of food products was the main reason for the rising WPI print. The prices of primary food articles and the overall food group, which have a weightage of 15.3% and 24.4% in the WPI basket, grew at 13.5% and 11.6% in October compared to 11.5% and 9.5% in September. Inflation for vegetables continued to be high at 63%, with the rate of inflation for staple vegetables such as potatoes rose to 78.7%, compared to 78.1% in September, while that of onions eased to 39.3%, compared to 78.8% in September. Overall, primary food articles became significantly expensive with the WPI print at 13.5% up from only 3.2% last month.

Retail inflation, as measured by the Consumer Price Index (CPI) rose to a 14-month high of 6.2% in October, going above the Reserve Bank of India’s tolerance band of 2-4% for the first time since August 2023.

Manufactured goods, which account for 64.2% of the WPI basket, saw an inflation of 1.5% up from 1% in September. Prices of manufactured goods excluding food items continued to contract for the sixth consecutive month in October. A fall in prices of non-food manufactured goods implies a decrease in the prices of inputs for industrial production, which could have a lagged impact on overall inflation.

The increase in food inflation was balanced slightly by a fall in the wholesale inflation for fuel and power, which has a total weightage of 13.2% in the WPI basket. Inflation in the fuel and power component contracted for the third consecutive month at 5.8%, a larger fall than a contraction of 4% in September.

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