The data released by the commerce and industry ministry on Monday showed the annual rate of inflation, as measured by the Wholesale Price Index, contracted 0.3% in September, slower than the 0.5% decline in August.
Deflation in September was primarily due to a fall in prices of chemical & chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of the previous year. Deflation refers to an overall decline in prices of goods and services.
“Primary food prices rose 3.4% year-on-year in September, a material deceleration from the double-digit +10.6% print in August. Food prices fell 6.5% m/m (August: 1.5%). Similar to the CPI data released last week, this sequential decline was largely led by fall in vegetable prices, though the magnitude of decline was much more in the vegetable WPI (-37.1% M-o-M) compared with the corresponding CPI (-15%),” according to a note by Barclays.
“Barring vegetables, prices of most other food items rose sequentially – particularly cereals, pulses, eggs & meat, spices, and even fruits (CPI for the latter had declined M-o-M). This indicates price pressures in food persist, despite some cooling of the seasonal price surge,” the Barclays note added.
According to the latest data released by the National Statistical Office (NSO) last week, retail inflation eased to a three-month low of 5% in September, slower than the 6.8% increase in August and below the RBI’s upper tolerance level.
Economists said they expect an uptick in wholesale prices in the months ahead due to a number of factors such as rising crude oil prices. They also expect RBI to continue with its prolonged pause on interest rates as it keeps a close watch on commodity prices and lurking risks.
“With the support of high base fading, some uptick in WPI inflation numbers could be seen in second half of fiscal year. Elevated global crude oil prices and risk to kharif harvest from a skewed rainfall pose upside risks…,” said Rajani Sinha, chief economist at ratings agency CareEdge.