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October wholesale price inflation rises to 5-month high of 12.5%

The rise in WPI was due to a rise in fuel inflation, which rose to 37.2 percent, up from 24.8 percent in September.

November 15, 2021 / 03:23 PM IST
Representational Image.

Representational Image.

Wholesale inflation in the country surged to 12.5 percent in October, up from 10.6 percent in September mainly due to a rise in prices of fuel, food and metals. Wholesale inflation was at 11.6 percent in August and 11.5 percent in July.

Measured by the Wholesale Price Index (WPI), wholesale inflation in India strengthened after remaining low for four straight months till September, government data released on November 15 said.

Economists had earlier said the September reading was reaching an inflexion point. Wholesale inflation reached record high levels in May after prices continued to rise for five straight months.

The primary reason behind overall inflation having moderated in the past few months is that the rise in fuel prices was slower. While fuel inflation has not fallen to 2020 levels, the volatility had gone down. But in October, fuel inflation again rose to 37.2 percent, up from September's 24.8 percent, August's 26 percent and July's 27 percent.

After declining for 11 straight months, fuel prices had risen just 2 percent in February, 2021 before escalating rapidly. After that till May, fuel inflation had nearly doubled for three straight months hitting 37 percent. Spiraling fuel prices that pushed up cost of transportation have led to costs spiking economy- wide.

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"Partly reflecting the issues related to coal availability, the electricity sub-index spiked by 19 percent in month on month terms in October 2021, pushing up the overall fuel inflation to a sharp 37 percent. Moreover, while crude oil prices firmed up, the index for natural gas surged by 31 percent in Month-on-Month terms in October 2021. ," Aditi Nayar, Chief Economist, ICRA said.

With demand reviving, ICRA expects producers to start passing through higher input and freight costs, even as the tax cuts on fuels will offer them a breather. "Led by the base effect, we expect the WPI inflation to moderate in the months ahead, and print at 7.5-8.5 percent," Nayar added.

Overall inflation was further pushed up by a 12.04 percent rise in manufacturing prices in October, slightly up from the 11.4 percent rise in September.
Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 6 years. He has also extensively covered evolving industry and government issues. He was earlier with Business Standard newspaper.
first published: Nov 15, 2021 12:52 pm

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