Softening food articles inflation, especially pulses and vegetables, led to the easing of Wholesale Price Index (WPI)-based inflation for September 2016 at 3.57 per cent on a sequential basis.
The latest reading was lower than the August WPI print of 3.74 per cent, official data released on Friday showed. In September last year, WPI inflation had come in at (-) 4.59 per cent.
The softening of WPI in September, although modest, spells good news as it comes on the heels of retail inflation hitting a 13-month low of 4.31 per cent for the same month. The RBI is now guided by retail inflation in deciding its monetary actions.
The overall food articles inflation, which accounts for weightage of 14.34 per cent in the WPI, declined to 5.75 per cent in September 2016 from level of 8.23 per cent in August 2016.
For the first time in the last six months, wholesale vegetable prices inflation moved into the negative territory with contraction of 10.91 per cent. In September last year, vegetable price inflation had contracted to the tune of 8.60 per cent on a year-on-year basis.
Pulses inflation softened to 23.99 per cent in September from a level of 34.55 per cent in previous month.
Aditi Nayar, Vice-President and Senior Economist, ICRA, said that although WPI inflation has eased in a modest way, the rise in core inflation suggests that domestic pricing power has not weakened.
Manufacturing products, which have weightage of 64.97 per cent, inflation increased to 2.48 per cent in September from 2.42 per cent in August. The latest reading for manufacturing products is the highest in the last six months.
Nayar also highlighted that the month-on-month easing in food prices at the wholesale level was nearly twice the pace revealed by the retail data. This sequential easing combined with a favourable base effect cooled food inflation to a five month low in September 2016, she said.
Fuel & Power, which has weightage of 14.91 per cent in WPI inflation increased to 5.58 per cent in September from 1.62 per cent in August 2016.
Rishi Shah, Economist, Deloitte India, said the rise in inflation in energy and manufactured products is unlikely to be a cause of concern as global demand still remains subdued.
However, fuel prices are likely to see some rise in the coming prints but the increment is likely to be capped at manageable levels. Overall, the inflation at the wholesale level is likely to remain subdued in the coming months, Shah added.