India’s wholesale price inflation reached 11.39 per cent in September, up from 9.92 per cent in August, the government said on Wednesday. The wholesale price index (WPI) measures price changes at the wholesale stage, before goods reach shoppers. The figure follows Monday’s release of retail data, which showed inflation at 5.54 per cent in September, a 23-month high, against 4.83 per cent in August.
Fuel and power inflation rose to 25.85 per cent from 22.93 per cent. Inflation in crude petroleum and natural gas rose to 57.3 per cent, against 34.4 per cent in August. Manufactured goods, nearly two-thirds of the index, recorded their highest inflation in the series, at 9.76 per cent.
Food inflation in the wholesale index rose to 8.66 per cent from 7.05 per cent. The Press Trust of India news agency linked the broader rise in wholesale prices to the West Asia war. The blockade of the Strait of Hormuz, a key route for most of India’s crude oil imports, has raised global crude and fertiliser costs.
Retail inflation, measured by the Consumer Price Index (CPI), has stayed above the Reserve Bank of India’s (RBI) 4 per cent target for four straight months, an editorial in the newspaper The Hindu noted. The central bank tolerates a band of 2 to 6 per cent, so the headline rate sits 0.46 percentage points below the ceiling.
Rural inflation stood at 6.08 per cent, against 4.88 per cent in urban areas. The editorial said rural food inflation touched 8.06 per cent. Onion prices rose 108.09 per cent from a year earlier.
Core inflation, a measure that leaves out food and fuel but keeps precious metals, rose to 4.6 per cent from 4.16 per cent, which the editorial read as a sign of broadening price pressures.
The RBI said last week there was “some evidence of elevated inflation expectations and generalisation of inflation”. The phrase means price rises are spreading beyond food and fuel to a wider range of goods and services. In August, the bank had seen “little signs” of such spread.
The Indian Express reported that 129 of the 358 goods and services in the basket used to calculate retail inflation showed inflation of 4 per cent or more in September, against 65 in January. The RBI’s own index, which weights each item by its place in household spending, put almost 46 per cent of the basket above that mark in September. The share was 37 per cent in August and 16 per cent in January. Economists at Nomura called the 37 per cent reading “low by historical standards” and said their own broader index was tracking below average, though that assessment predates the September data.
The RBI’s Monetary Policy Committee raised the repo rate, at which it lends to commercial banks, by 25 basis points to 5.50 per cent in October. A basis point is one hundredth of a percentage point. The editorial said this ended a pause that followed a February 2023 increase, and that a further hike in December remains possible if price pressures widen. The Indian Express said the consensus leans towards a further 50 to 75 basis points of increases over four to six months.
The Indian crude basket, as tracked by the Petroleum Planning and Analysis Cell, rose 41 per cent between July and September, from $82.04 to $116.09 a barrel.
Jairam Ramesh, general secretary (communications) of the Congress party, criticised Prime Minister Narendra Modi’s government on Tuesday. He said food inflation in the retail data had reached 7.74 per cent and that “Back-Breaking Inflation is the Reality”. He also recalled the government’s promise of “achhe din”, or good days.
Radhika Piplani, chief economist at Motilal Oswal Financial Services, told Financial Express that rural inflation was likely to rise above 7 per cent by year end, citing higher food prices and drought in some states. Labour Bureau data showed wage growth for rural men slowing to just over 3 per cent in July and August, from above 16 per cent in April to June.
