WPI inflation rises to seven-month high at 1.3% in September1 min read . Updated: 14 Oct 2020, 01:32 PM IST
- Data released by the industry department showed wholesale price food inflation shot up to 8.17% in September from 3.84% a month ago
India’s wholesale price inflation picked up pace in September hitting a seven-month high at 1.3%, driven mostly by quickening of food prices, which may force the central bank to opt for a prolonged pause on policy rates.
Data released by the industry department showed wholesale price food inflation shot up to 8.17% in September from 3.84% a month ago, as vegetable prices of potato (107.63%) and pulses (12.53%) rose significantly.
Retail inflation, data for which was released on Monday, also had accelerated to a four month high at 7.34% in September, remaining well above the central bank’s targeted range for the sixth consecutive month, as food prices rose.
On Friday, the reconstituted Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) kept policy rates unchanged as inflation continued to remain high even as it took a slew of measures to reduce borrowing cost of credit. Governor Shaktikanta Das said inflation will ease gradually towards the target in the third and fourth quarter of the fiscal.
“Our analysis suggests that supply disruptions and associated margins/mark-ups are the major factors driving up inflation. As supply chains are restored, these wedges should dissipate. Meanwhile, aggregate demand remains subdued and there is evidence of considerable resource slack. Large excess supply conditions characterise food grains and horticulture production, and the outlook for agriculture is bright. Crude prices remain range-bound. The MPC has hence decided to look through the current inflation hump as transient and address the more urgent need to revive growth and mitigate the impact of COVID-19. This has provided the space for continuing with the accommodative stance with forward guidance as set out in the MPC’s resolution," Das said in his statement.
Aditi Nayar, principal economist at ICRA Ltd said similar to the trend displayed by the retail inflation, wholesale price inflation was driven by a quickening in the prices of food items. “The disaggregated data did not provide much comfort regarding the inflation outlook, and today's data further cements the likelihood of an extended pause from the MPC. The pace with which vegetable prices recede back to more normal levels will crucially guide the outlook for food and headline inflation in the near term," she added.