New Delhi: India’s wholesale inflation rose 2.6% in September from a year ago, slower than the provisional 3.24% recorded in August, aided by a sharp fall in food and vegetable prices, data released by the commerce and industry ministry showed on Monday.

Wholesale price index (WPI) inflation was recorded at 1.36% in September last year.

Prices of some manufactured items such as basic metals and semi-finished steel, however, inched up in September compared to August.

“The correction in vegetable prices was the chief driver of the decline in primary food inflation to 2% from 5.8%. A favourable base effect aided the moderation in inflation for fuel and power, despite the recent rise in prices of petrol, diesel, aviation turbine fuel and other fuels," said Aditi Nayar, principal economist at Icra Ltd.

Prices of some vegetables, such as tomatoes, which had risen sharply in July, corrected in September. Nayar said that core inflation, which excludes food and energy prices, rose to a 35-month high of 2.8% in September from 2.6% in August.

Retail inflation for September as indicated by the consumer price index (CPI), which has a different composition of commodities, however remained unchanged in September at 3.28%, from its revised figure for August, according to the data released by the Central Statistics Office (CSO) on 12 October.

The central government’s reduction in excise duty on petrol and diesel by Rs2 and some of the state governments following suit by reducing value added tax (VAT) on auto fuel earlier this month is expected to dampen inflation for fuels in October.

The cooling of inflation in September could add more strength to the central government’s appeals to the Reserve Bank of India (RBI) for a more accommodative monetary policy that could bring down the cost of capital for businesses.

RBI had on 4 October left interest rates unchanged, citing upside risks to inflation. The central bank had also lowered its economic growth forecast for the current year to 6.7% from an earlier projection of 7.3%.

India’s factory output rebounded strongly to a nine-month high of 4.3% in August as companies stepped up production to restock warehouses ahead of the festival season, after they reduced output in June and July owing to uncertainties regarding implementation of the goods and services tax (GST).

The rebound in the index of industrial production (IIP) came after economic growth unexpectedly slowed to a three-year low of 5.7% in the first quarter ended June.

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