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NEW DELHI : The country’s wholesale price inflation galloped to a five-month high at 12.54% in October, breaking the five-month downward trend as prices of manufactured items and fuel groups shot up. 

Fuel inflation accelerated to 37.2% in October from 24.8% in the preceding month, while inflation for manufactured items rose to 12% from 11.4% during the same period, data released by the industry department showed. 

Inflation for food items, however, contracted 1.7% during October as vegetable prices eased from their level a year ago. 

High petrol, diesel, and cooking gas prices drove fuel inflation, while high prices of basic metals, textiles, plastics and edible oils drove inflation of manufactured items. 

Retail inflation marginally picked up to 4.48% in October because of higher than expected fuel and food inflation. 

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Fitch Solutions cautioned on Thursday that despite one of the strongest growth outlooks across emerging markets, policymakers in India are facing rising inflationary pressures, which will start to pose policy challenges. 

The central government slashed excise duty on petrol and diesel by 5 per litre and 10 per litre, respectively, offering some relief to consumers on the eve of Diwali. 

Last month, the International Monetary Fund (IMF) raised its inflation forecast for India to 5.6% for this fiscal from the 4.9% estimated in April, citing growing inflationary risks worldwide even as it kept its growth forecast for the year unchanged at 9.5% for Asia’s third-largest economy. 

In its latest report, Fitch maintained the FY22 growth forecast for India at 9% and 7.6% for FY23, which is slightly below consensus forecasts of 9.2% and above consensus estimates of 7.4% next year. 

Core inflation, excluding volatile food and fuel items, rose to a fresh all-time high of 11.9%. IDFC Bank said widening cost-push pressures is seen with 19% of items by weight contributing 50% of overall WPI inflation against 15% of items in September. “With demand reviving, we expect producers to start passing through higher input and freight costs, even as the tax cuts on fuels will offer them a breather. Led by the base effect, we expect WPI inflation to moderate in the months ahead and print at 7.5-8.5% in March 2022," said Aditi Nayar, chief economist at ICRA Ltd. 

Sunil Kumar Sinha, principal economist at India Ratings, said a sharp surge in month-over-month changes in price levels of 2.3 percentage points was the reason behind the rise in wholesale inflation in October. “With coal shortage abating, an unexpected spurt in spot electricity prices are expected to moderate in the near term. However, with Brent crude breaching the $82/barrel mark in the international markets, fuel inflation is unlikely to provide any breather. Moreover, the recent outbreaks of covid cases in China and Europe indicate that the challenge of covid-19 has not ended. Therefore, wholesale inflation is likely to remain at elevated levels in the near term," he said.

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