WPI inflation slows to 3.57% on veggie prices

NEW DELHI: Cooling food prices helped wholesale inflation decline in September after it touched a two-year high in August, strengthening the case for more rate cuts after retail inflation also showed a sharp decline.

India's wholesale prices as measured by WPI (wholesale price index) softened to 3.57% in September compared with 3.74% in August. The lower inflation rate is attributed to a 10.9% decline in wholesale vegetables prices which till a month ago were the major cause of rising food inflation.

“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,” said senior ICRA economist Aditi Nayar. Consumer inflation moderated to 4.3% in September from 5.05% in August, according to data released on Friday. Data released by the commerce and industry ministry showed September WPI food articles inflation at 5.75% as against 8.23% in August.

However, potatoes became 73% pricier. “Nonfood manufacturing prices rose for the third consecutive month indicating improving pricing power for producers. In terms of sequential momentum the WPI index contracted for the second consecutive month due to contraction in food prices, while nonfood prices increased,” Yes Bank said in a note. The government also revised the rise in wholesale price inflation for July to 3.72% from 3.55% earlier.