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Wholesale Inflation Slows to 3.57%, Good Monsoon Cools Veggie Prices

Press Trust Of India

Updated: October 14, 2016, 10:03 PM IST
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Wholesale Inflation Slows to 3.57%, Good Monsoon Cools Veggie Prices
Good monsoon helped cool food prices, prompting the industry to demand interest rate cut to boost economic activity. (FILE PHOTO: GETTY IMAGES) Representative image

New Delhi: Wholesale inflation eased to 3.57 percent in September, reversing its seven-month uptrend, as good monsoon helped cool food prices, prompting the industry to demand interest rate cut to boost economic activity.

The wholesale price index-based inflation, reflecting the annual rate of price rise, stood at 3.74 percent in August.

In September 2015, WPI inflation was (-)4.59 percent.

On Thursday, the official data had showed retail inflation falling to 13-month low of 4.31 percent in September.

After the release of WPI data, industry chambers gave accolades to the Reserve Bank for the 0.25 percentage point reduction in interest rate last week.

"It can be said that the anti-inflationary supply side measures of the government have been successful and rising inflation has been brought under control. In this context, the RBI governor needs to be congratulated for lowering rates in anticipation of a benign inflationary outlook," CII said.

Wholesale inflation had been on a rise since February this year.

During September, WPI inflation in vegetables witnessed deflationary pressures and was recorded at (-) 10.91 percent.

Inflation in this category had scaled a high of 28.45 percent in July.

This was aided by inflation for onion, which was at (-)70.52 percent.

Pulses inflation continued to rule high at 23.99 percent in September, according to the Commerce Ministry data.

Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 73.31 percent. Prices of fruits rose 14.10 percent during the month.

Overall, the food inflation basket showed good moderation with inflation at 5.75 percent in September, as against 8.23 percent in August.

Ficci said good monsoon and government action helped in abating the price level and indication are there that prices will remain benign.

"We do hope that going ahead banks will take a cue and further translate this into lower lending rates which is one of the key factors that can help boost IIP which continues to remain dismal," Ficci said.

India Ratings and Research said that both retail and WPI moderated in September primarily led by softening food prices.

"The trend is along expected lines and Ind-Ra believes it is likely to continue in the next month."

The all-powerful Monetary Policy Committee headed by RBI Governor Urjit Patel last week cut benchmark interest rates by 0.25 percent to 6.25 percent.

While he had signalled more tolerance towards inflation, the easing of CPI data was in line with the RBI's forecast for average 5 percent inflation in fourth quarter of 2016. This, many expect, would create more room for interest rate cuts.

Reasoning the rate cut, RBI had said: "The Government has announced several measures to cool food inflation pressures, especially with regard to pulses. These measures should help in moderating the momentum of food inflation in the months ahead. This has opened up space for policy action".

The September inflation print for manufactured articles read at 2.48 percent, as against 2.42 percent in August.

The rate of inflation in sugar was at 32.92 percent and that for petrol was 1.25 percent.

ICRA Senior Economist Aditi Nayar said despite flaring up of crude oil prices it expects WPI inflation to remain below 4 percent in third quarter.

"Subsequently, WPI inflation is likely to rise to as much as 4.5 percent in January-March 2017."

The WPI inflation for July has been revised upwards at 3.72 percent, against provisional estimate of 3.55 percent.

First Published: October 14, 2016, 10:03 PM IST
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