Wholesale inflation based on Wholesale Price Index (WPI) rose to 1.8 per cent in September as against 1.31 per cent in August, government data released on Monday showed. The increase was mainly on account of a surge in vegetable prices. Experts feel this rise will impact retail inflation in the coming months.
“The positive rate of inflation in September, 2024 is primarily due to an increase in prices of food articles, food products, other manufacturing, manufacture of motor vehicles, trailers & semi-trailers, manufacture of machinery & equipment, etc,” a statement by Commerce & Industry Ministry said.
Inflation in food items shot up to 11.53 per cent last month against 3.11 per cent in August. This was led by 48.73 per cent inflation in vegetables compared with (-)10.01 per cent in August. Inflation in potatoes and onions continued to be high at 78.13 per cent and 78.82 per cent, respectively in September. The fuel and power category witnessed deflation of 4.05 per cent in September against a deflation of 0.67 per cent in August.
The Reserve Bank of India (RBI), which takes into account mainly retail inflation while framing monetary policy, kept the benchmark interest rate, or the repo rate, unchanged at 6.5 per cent in its monetary policy review earlier this month.
Commenting on WPI number, Rajani Sinha, Chief Economist with CARE, said that risks to food inflation have not fully abated completely and needed monitoring. Factors such as uneven monsoon, pre-harvest rainfall, and an increase in global edible oil prices add to the risks to food inflation. Although the monsoon was approximately 8% above normal, distribution issues persisted. Kharif sowing for pulses and some oilseeds has been below the historical average, which is concerning. Additionally, the extended monsoon season and recent pre-harvest showers increase the risk of crop damage.
Apart from food price pressures, additional inflation risks arise from the external sector. “The potential for a broadening conflict in the Middle East could disrupt supply chains and impact global energy prices, which would have ripple effects on the domestic economy. Furthermore, the announcement of an economic stimulus in China has led to an increase in global commodity prices, particularly industrial metals over the past couple of weeks. For FY25, we expect inflation to average 2.5 per cent,” she said.