Oct wholesale inflation at 40-month low of 0.16% on cheaper non-food items

A labourer sits on sacks of food grains while waiting for customers at a wholesale market in Ahmedabad (Photo: Reuters)
Wholesale inflation in October crashed to a 40-month low of 0.16 per cent, down from 0.3 per cent rise in September.

The previous low was in June 2016, when inflation was negative 0.1 per cent. Deflationary pressure on manufactured product prices, for a 12th straight month, has continued to pull down the Wholesale Price Index- (WPI)-based inflation. 

In line with the trend, prices of manufactured products, which have a combined weight of 65 per cent in the index, contracted at a faster clip. Contraction stood at 0.84 per cent in the latest month, against a fall of 0.42 per cent in September. Inflation of manufactured food products, however, rose to 3.7 per cent from 3.1 per cent.

“Inflation in manufacturing is at its lowest level since April 2016. The WPI in manufactured goods was 4.6 per cent in the corresponding month a year ago. The contractionary pattern recorded in the previous two months indicates the lack of purchasing power of manufacturers. Inflation in this component has seen a decline on a sustained basis since October 2018,” Madan Sabnavis, chief economist at CARE Ratings, said.

Nine of the 17 components within the manufactured products have recorded a contraction in the latest month. Experts say the index would continue to see low growth due to the poor health of the manufacturing sector, despite a quick uptick in global commodity prices and food inflation.

The official data released on Thursday showed wholesale inflation, mainly pushed by food inflation, rose to 9.8 per cent in October, from 7.4 per cent in September. Pressure points remained in food category with cereal prices rising by 8.32 per cent in October, up from 6.24 per cent.

Prices of pulses also rose by 16 per cent in October, showing a sharp reversal from the 13.5 per cent contraction in September. The rise in prices of food components to a more than five-year high limited the fall in wholesale inflation. Upside risks to wholesale food inflation is likely to emanate from post-harvest supply concerns and a low base effect, economists said.

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