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NEW DELHI : India’s wholesale price index (WPI)-based inflation eased for the fourth consecutive month to 10.66% in September because of a sharp contraction in food prices, even as manufactured item-based inflation picked up marginally. 

Data released by the industry department showed that while food inflation contracted 4.69% in September from a 1.29% dip a month ago, manufactured products inflation rose to 11.41% from 11.39% in the preceding month. With crude oil price hovering around $80 per barrel, fuel inflation remained elevated at 24.81% during the month, easing from 26.09% in August. 

Among food items, potato (-48.95%), onion (-1.91%), and fruits (-1.27%) contracted, while prices of pulses rose 9.42%. Among manufactured items, prices of basic metals (26.71%), textiles (16.81%) rose sharply. 

Data released on Tuesday showed that India’s retail inflation eased to a five-month low of 4.35% in September on sharply decelerating food inflation, providing comfort to the central bank, which kept policy rates unchanged for the eighth time in a row last week to support a nascent economic recovery. 

In its latest bi-monthly monetary policy review last week, the Reserve Bank of India (RBI) seemed more comfortable about the path of inflation than it was in August, despite the recent increases in global commodity prices. RBI has cut its retail inflation forecast for this fiscal to 5.3% from 5.7% earlier. 


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“The inflation trajectory is set to edge down in Q3:2021-22, drawing comfort from the recent catch-up in kharif sowing and likely record production. Along with adequate buffer stock of foodgrain, these factors should help to keep cereal prices range-bound. Vegetable prices, a major source of inflation volatility, have remained contained in the year so far and are likely to remain soft, assuming no disruption because of unseasonal rains. Supply-side interventions by the government in the case of pulses and edible oil are helping to bridge the demand-supply gap. The situation is expected to improve with kharif harvest arrivals," RBI’s monetary policy committee (MPC) said. 

MPC, however, observed that pressures persist from crude oil prices, which remain volatile over uncertainties on the global supply and demand conditions. “Domestic pump prices remain at very high levels. Rising metals and energy prices, acute shortage of key industrial components, and high logistics costs are adding to input cost pressures. Weak demand conditions, however, are tempering the pass-through to output prices. CPI headline momentum is moderating with the easing of food prices which, combined with favourable base effects, could bring about a substantial softening in inflation in the near term," it said. 

The International Monetary Fund (IMF) on Tuesday, however, raised its inflation forecast for India to 5.6% for this fiscal from the 4.9% estimated in April, citing growing inflationary risks worldwide. 

Core inflation was stable at an elevated 11.1% in September, but the month-on-month increase of 0.6% reveals the underlying pressures related to prices of commodities and logistics, said Aditi Nayar, chief economist at Icra Ratings. “After four months of consecutive moderation, we expect WPI inflation to rise in October and remain in double-digits in Q3FY22. While a favourable base will moderate WPI inflation during Q4FY22, it is nonetheless likely to average around 10% in FY22. MPC members are unlikely to choose to sacrifice growth at a time when inflation is being driven up by global supply-side issues. We remain convinced that monetary policy normalization will commence only after demand-side pressures start dominating inflation," she said.

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