New Delhi- The wholesale price-based inflation declined to a 18-month low of 10.7 per cent in September, as prices of food, fuel and manufactured items softened.
Although the wholesale price index (WPI) based inflation declined for the fourth consecutive month, it continued to remain in double digit for the 18th month since April 2021.
“Inflation in September, 2022 is primarily contributed by rise in prices of mineral oils, food articles, crude petroleum & natural gas, chemicals & chemical products, basic metals, electricity, textiles etc. as compared to the corresponding month of the previous year,” an official statement said.
The wholesale inflation was 12.41 per cent in August and 11.80 per cent in September last year. This year, WPI touched a record high of 15.88 per cent in May.
Economists say the gradual month-on-month decline in WPI is mainly due to moderation in commodity prices and pegged inflation to come down further with overall recovery momentum and weaker outlook on commodity prices.
Inflation in food articles in September eased to 11.03 per cent, against 12.37 per cent in August. However, inflation in vegetables rose to 39.66 per cent during the month under review, as against 22.29 per cent in August.
Acuit Ratings & Research, Chief Analytical Officer, Suman Chowdhury said the share of food on a consolidated basis in WPI stands much lower at 24.3 per cent, as compared to 45.9 per cent weightage in the Consumer Price Index (CPI) construct.
“Therefore, the impact of higher food prices continues to be modest in the WPI trajectory with inflation in food articles at 0.28 per cent only on a sequential basis,” Chowdhury said.
In the fuel and power basket, inflation came in lower at 32.61 per cent in September, against 33.67 per cent in August. In manufactured products and oil seeds it was 6.34 per cent and (-) 16.55 per cent, respectively.
“What is driving the downward trajectory in the WPI inflation is the moderation in the fuel prices and the sequential contraction in manufactured products inflation though it is partly offset by the increase in power tariff in some regions.
“This reflects the limited ability of producers to pass through higher input costs in the context of the global slowdown and the increase in interest rates,” Chowdhury added.
The RBI mainly looks at retail inflation to frame monetary policy. Retail inflation remained above the Reserve Bank’s upper tolerance threshold of 6 per cent for the ninth month in a row and was at a 5-month high of 7.41 per cent in September, as per data released earlier this week.
“We expect the WPI trajectory to moderate further given the slowdown in the overall recovery momentum and the weaker outlook on commodity prices. Over the next few months, the headline retail inflation is likely to start mirroring such a trend but that process may be gradual given the uptick in supply-driven food inflation,” Chowdhury added.
To tame stubbornly high inflation, the RBI has hiked the key interest rate four times this year to 5.90 per cent — the highest since April 2019. (PTI)