Wholesale inflation falls again in September, hits 18-month low of 10.70%

India's inflation based on the Wholesale Price Index (WPI) crashed to an 18-month low of 10.7 percent in September, the commerce ministry said on October 14.

WPI inflation was 12.41 percent in August. In September 2021, it stood at 11.80 percent.

While wholesale inflation fell for the fourth consecutive month in September, it has been above the 10 percent mark for one-and-a-half years now.

The sharp decline in WPI inflation in September was driven by a drop in prices of food items and manufactured products.

Wholesale food inflation fell nearly 2 percentage points to 8.08 percent in September from 9.93 percent in August, while inflation for manufactured products declined to 6.34 percent from 7.51 percent.

The fall in inflation of manufactured products is crucial as these items make up 64 percent of the WPI basket.

Meanwhile, fuel and power inflation also eased to 32.61 percent in September from 33.67 percent in August. However, the index for the fuel and power group rose marginally by 0.1 percent on a month-on-month basis in September, suggesting some sequential price momentum.

In contrast, the indices for food as well as manufactured products were down 0.5 percent month-on-month in September.

Overall, the all-commodity index of the WPI was down 0.7 percent in September compared to August -- the third consecutive month in which it has declined sequentially.

The sharp fall in wholesale inflation comes even as retail inflation rose slightly more than expected last month.

Data released on October 12 by the statistics ministry showed the more closely followed Consumer Price Index (CPI) inflation rose to 7.41 percent in September.

The latest CPI data has confirmed that the Reserve Bank of India (RBI) has failed to meet its mandate as inflation has been outside the 2-6 percent tolerance band for three consecutive quarters.

CPI inflation averaged 6.3 percent in January-March, 7.3 percent in April-June, and now 7 percent in July-September.

The central bank has raised the repo rate by a staggering 190 basis points in the last five-and-a-half months to 5.9 percent in an attempt to rein in inflation. It is widely expected to increase the policy rate by another 50 basis points or so by the end of the current financial year.

The Monetary Policy Committee is scheduled to next meet December 5-7.