India’s WPI inflation rises to 12.54% in October

In October, wholesale price inflation jumped to a five-month high of 12.54 per cent, up from 10.66 per cent in September, owing to a broad-based increase in the prices of major commodities, headed by gasoline and electricity, vegetables, oils and chemicals.

Core wholesale price inflation, according to economists, set a new all-time high of 11.9 per cent in October, marking the seventh month in a row that the headline wholesale inflation figure has risen into the double digits. Wholesale prices had risen at a pace of 1.31 per cent in October 2020.

In October, wholesale gasoline and electricity inflation jumped to 37.2 per cent, up from over 25 per cent the previous month, while inflation in manufactured goods accelerated to above 12 per cent.

‘Partly reflecting the issues related to coal availability, the electricity sub-index spiked by 19% sequentially, pushing up the overall fuel inflation to a sharp 37%. Moreover, while crude oil prices firmed up, the index for natural gas surged by 31% month-on-month’, said Aditi Nayar, ICRA chief economist.

In September, the Wholesale Food Price Index increased by 3.06 per cent, up from 1.14 per cent in September. On a sequential basis, primary food product prices rose to their highest level since August 2017, according to Morgan Stanley analysts Upasana Chachra and Bani Gambhir, who said the wholesale pricing index (WPI) jump was larger than expected.

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Food costs increased 5 per cent month over month, owing to an increase in the price of vegetables and fruits, which is expected to persist until early November, Aditi Nayar said, adding that this tendency, which is most pronounced in potatoes, tomatoes and onions, will work against the food index’s seasonal moderation in November.

‘The high rate of inflation in October 2021 is primarily due to rise in prices of mineral oils, basic metals, food products, crude petroleum & natural gas, chemicals and chemical products, etc. as compared to the corresponding month of the previous year’, said the Office of the Economic Advisor in the Department for Promotion of Industry and Internal Trade (DPIIT) which releases the WPI.

As per Nayar, who anticipates wholesale inflation to decline in the coming months, the gasoline tax cuts announced earlier this month may bring some relief to producers battling with high commodity and freight costs reflected in chronically high manufactured product inflation.

This month, the rise in wholesale pricing may have a pass-through effect at the retail level. In October, retail inflation increased less sharply than in September, rising to 4.48 per cent from 4.35 per cent in September. However, urban India saw above 5 per cent inflation, with prices for oils, transportation and communication, as well as vegetables, all rising sharply.