WPI inflation eases to 40-month low of 0.16% in October on subdued prices of non-food and manufactured products

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Wholesale prices based inflation eased further to 40-month low of 0.16 percent in October, as against 0.33 percent in September due to subdued prices of non-food articles and fall in prices of manufactured items, government data showed on Thursday.

The annual inflation, based on monthly wholesale price index (WPI), was at 5.54 percent in October 2018. The earlier lowest level of inflation witnessed at negative 0.09 percent (disinflation) in June 2016.

The rate of price rise for food articles was at 9.80 percent during the month, while for non-food articles it stood at 2.35 percent, showed the data released by the Ministry of Commerce and Industry.

For manufactured products, the wholesale inflation was at (-)0.84 percent in October 2019.

However, the retail inflation for the month hit a 16-month high of 4.62 percent due to soaring prices of food articles, including fruits and vegetables.

The retail inflation during October remains above the RBI’s comfort level of 4 percent.

Aditi Nayar, an economist at ICRA said, looking ahead the pace of normalisation in vegetable prices will be the key driver of the trend in food inflation over the next few months.

“Overall, the CPI inflation may continue to print higher than 4 percent in the remainder of FY2020, complicating policy choices in light of the slowdown in economic growth momentum.

“The sharp uptick in the CPI inflation in October 2019 has contrasted with the industrial contraction recorded in September 2019. In our view, the extent to which the Q2 FY2020 GDP growth reading eases further from the 5 percent recorded in the previous quarter, will influence the MPC’s decision on whether to cut rates further, and by how much, in the December 2019 policy review,” she said.

Rahul Gupta, Head of Currency, Emkay Global Financial Services, said this sharp rise was especially due to uptick in food prices amid erratic monsoon.

“Despite rising inflation, we expect (the) RBI to continue its easing cycle on the back of sluggish growth and weak core inflation and cut repo rate at December meeting,” Gupta said.

(With PTI inputs)





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