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New Delhi: India's wholesale inflation eased to a 19-month low in October, touching single digits for the first time since March last year led by sharp moderation in food, fuel, and manufactured goods inflation, official data showed. 

In fact, overall inflation cooled for the fifth straight month, which may reflect in retail inflation data with a lag. Wholesale price index-based inflation eased sharply to 8.39% in October compared to 10.7% in the previous month,

With international prices for commodities and fuel relatively lower, economists expect domestic prices to cool further in the coming months. The easing of inflation could also be attributed to the high base of last year.

Wholesale price index-based inflation eased sharply to 8.39% in October compared to 10.7% in the previous month, data released by the ministry of commerce and industry showed on Monday. Wholesale inflation eased to single digits after eighteen straight months of double-digit inflation.

Wholesale inflation had touched a five-month high of 7.41% in September, and the data for October is expected today.

“On expected lines the WPI inflation number has come in single digits. It will continue to moderate on the back of the base effect as well as softening of global commodity prices especially energy and metals… Some of the food articles would tend to show a sharp tick in prices – vegetables and cereals in particular. Pulses too may inch upwards," said Madan Sabnavis, chief economist, Bank of Baroda.

Food articles inflation for both primary and processed categories eased further in October compared to the previous month. WPI Food Index, which has a nearly 25% weight in the overall index, saw inflation moderate to 6.48% in October compared to 8.08% in September and 9.93% in August.

After easing to below $90 per barrel in September, Brent crude oil prices are hovering over $95 per barrel amid demand recovery hopes as China lifted Covid-19 curbs.

Primary articles inflation eased marginally to 11.04% in October from 11.73% in September.

Under that head, food articles saw inflation lower to 8.33% during the month from 11.03% in September and 12.37% in August.

Economists expect the RBI-led monetary policy committee to further hike policy rates in the policy review in December.

While vegetable inflation remained sticky, it eased sharply to 17.61% in October, down from 39.66% in September. Inflation In case of fruits in case of fruit moderated sharply to 0.23% from 4.5% in the previous month.

Manufactured goods witnessed continuous decline in WPI inflation to 4.42% in October from 6.3% in September.

Fuel and Power inflation continued with a downward trajectory, and eased sharply to 23.17% in October, down from 32.61% in September and 33.67% in August. Crude petroleum inflation eased to 30.69% from 32.18% in September. Inflation for diesel eased significantly to 43.05% in October, down from 65.96% and that for petrol eased to 25.02% from 40.38% last month.

The Union government had in May cut central excise duty on petrol by 8 per litre and by 6 per litre for diesel, costing the exchequer close to 1 trillion per year in revenues. Centre also imposed export tariffs on petrol, diesel, and Air turbine fuel besides windfall taxes on crude production to improve domestic supplies to ease inflation and cut the need for imports and lower import bill.

ABOUT THE AUTHOR

Dilasha Seth

" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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