September wholesale inflation slips to 2.6 per cent on lower food prices

Wholesale inflation eased to 2.6% in September as prices of food articles moderated, reversing the spike in the previous month and triggering demand for a cut in interest rates. The Wholesale Price Index ( WPI)-based inflation had risen to a four-month high of 3.24% in August. It was 1.36% in September 2016.

Industry body CII called for rate cut as both wholesale and retail inflation came in below expectation in September.

“In the recently announced monetary policy review, the opportunity was lost as far moderation of interest rate is concerned. However, given the moderation in both CPI and WPI inflation, the Reserve Bank should resume the rate easing cycle in its next monetary policy announcement to give a fillip to demand,” it said in a statement.



Data released earlier this week showed retail inflation at 3.28% in September, unchanged from August, as softer vegetable and cereal prices cushioned rise in services inflation.

The wholesale inflation in food articles declined to 2.04% in September from 5.75% in August. Inflation in vegetable prices cooled to 15.48% in September from a high of 44.9% in the previous month, driving the primary food inflation down to 2% from 5.8%.



The Reserve Bank of India had not cut rates in its policy review earlier this month even as inflation remained low and gross domestic product (GDP) growth declined to a three-year low of 5.7% in the April-June quarter. Core inflation rose to a 35-month high 2.8% in September from 2.6% in August.

“There is a possibility that the inflation for September 2017 would subsequently be revised higher on account of crude oil,” said Aditi Nayar, principal economist at ICRA, pointing out that crude prices have been budgeted lower. “Initial data has placed the index for crude petroleum at 55.6 for September 2017, only 1% higher than the level for June 2017, despite the 17% increase in the average price of the Indian crude oil basket in rupee terms during this time period,” Nayar said in a report.

Inflation in fuel and power category was placed at 9% in September, down from 10% in the previous month. Inflation is expected to climb up towards the end of the year as the favourable base effect begins to ease.