New Delhi: Inflation-based on wholesale prices spiked to a two-month high of 5.13 percent in September, mainly due to hardening of food prices as well as rise in cost of petrol and diesel.
The Wholesale Price Index (WPI) based inflation stood at 4.53 percent in August and 3.14 percent in September last year.
According to the government data released on Monday, food articles witnessed hardening of prices with deflation at 0.21 percent September as against 4.04 percent in August.
Deflation in vegetables was 3.83 percent in September, compared to 20.18 percent in the previous month, indicating relative rise in prices.
Inflation in 'fuel and power' basket in September was 16.65 percent. Individually, in petrol and diesel it was 17.21 percent and 22.18 percent, respectively, and for LPG it was 33.51 percent.
ICRA Principal Economist Aditi Nayar said while crude oil prices have cooled in the recent sessions, and the excise duty and VAT cuts would provide some relief for fuel prices, the weaker rupee would continue to push up the WPI inflation in the current month.
"This remains a crucial risk for the CPI inflation trajectory as well. Moreover, the sharp narrowing in the disinflation for primary food items, led by cereals, fruits, vegetables, condiments and spices, and tea, may be a precursor to a rise in the retail food inflation in the ongoing month," Nayar said.
Data released last week showed retail inflation rose to 3.77 percent in September from 3.69 percent in the previous month. The RBI mainly takes into account retail inflation data while formulating monetary policy.
"The divergence in the extent of the uptick displayed by the WPI and the CPI inflation prints for September 2018 reflects the underlying difference in the composition of these two indices, with a smaller weight of food items and a larger weight of globally traded commodities in the WPI than the retail basket," Nayar said.
India Ratings & Research Chief Economist D K Pant said WPI inflation has remained more than 4 percent in last five months, which suggest though the demand conditions in the economy have remained strong, the pace of demand growth is gradually declining.
"The prevailing market price for most kharif crops at major mandi's has remained lower than the MSP, suggesting procurement hasn't picked up. The future inflation trajectory would depend on the response of mandi prices with respect of new MSP, and the movement of crude oil price and value of currency," Pant said.
The government had, with effect from October 5, cut excise duty on petrol and diesel by Rs 1.50 per litre and asked state-owned oil firms to subsidise the fuel by another Re 1 a litre.
Still, fuel prices continued to rise, and petrol was sold at Rs 82.72 a litre, while diesel at Rs 75.46 per litre. Diesel and Petrol in Mumbai cost Rs 79.11 per litre and Rs 88.18 per litre, respectively, on Monday.
The 5.13 percent WPI inflation is the highest in two months, and a higher inflation than this level was last seen in July at 5.27 percent.
In its fourth monetary policy review for the fiscal, the Reserve Bank earlier this month maintained status quo on the benchmark interest rate but warned that volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation.
For October-March, the RBI pegged CPI-based retail inflation to be between 3.9-4.5 percent.
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Updated Date: Oct 15, 2018 15:29:34 IST