Economists polled by Reuters had estimated the WPI inflation to rise to 0.5% in September.
Though fuel and power prices declined in September, the contraction was slower than in the previous month at -3.35%. In August, it stood at -6.03%.
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Manufactured products inflation contracted to -1.34% in September from -2.37% in August. Vegetable prices eased to 1.54% in September from 5.62% in August.
"Deflation in September, 2023 is primarily due to fall in prices of chemical and chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of previous year," the official statement said.
The year-on-year change in the food article index showed a 3.35% rise during the month compared to 10.6% during August.
"The decline in WPI for September can be attributed to a substantial deceleration in food prices and the continued YoY contraction in fuel prices and manufactured products prices," said Rajani Sinha, chief economist at CareEdge Ratings.
"With the support of high base fading, some uptick in WPI inflation numbers could be seen in the second half of the fiscal year. However, with weak China demand, other global commodity prices are expected to remain benign and that should keep WPI inflation low," Sinha added.
Sinha expects WPI inflation to average below 1% in FY24.
Overall the segments and commodities that saw the most price rise during the month, apart from fuel and power, were basic metals, transport equipment, fabricated metal products, machinery and equipment, and rubber and plastic products.
Some of the groups that witnessed a decrease in prices are food products; motor vehicles, trailers and semi-trailers, electrical equipment, leather and related products, chemical and chemical products etc. in September, 2023 as compared to August, 2023," the statement added.
India's Consumer Price Index (CPI)-based inflation eased for the second consecutive month in September to 5.02%, aided by a slower rise in vegetable prices and overall decline in food inflation, from 6.83% in August.
The latest data for retail inflation, which was released on 12 October, falls within the Reserve Bank of India's (RBI) target range of 2-6%. The RBI, however, has a medium-term target to bring down retail inflation to 4% by 2024.
The wholesale inflation is expected to enter positive territory in the coming months due to rising crude prices and threats posed to kharif crop by skewed rainfall this year.
Earlier in October, the RBI had left the repo rate unchanged at 6.5%. Retail inflation has remained below the 6% mark since March 2023, even dropping to a 25-month low of 4.3% in May, before rising again in June due to surging food prices, which have since last month stabilised.
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