Wholesale inflation rises to 1.84% in Sept on higher food prices

Wholesale inflation for September

India’s wholesale inflation increased to 1.84 percent in September from a four-month low of 1.31 percent in the previous month on the back of higher food prices, data released by the government showed on October 14.

"The uptick was entirely led by an adverse base-led surge in the primary food articles inflation print to a 14-month high of 11.5% in September 2024 from 3.1% in the previous month," said Aditi Nayar, chief economist, Icra.

The wholesale price index (WPI) had witnessed a slight deflation of 0.1 percent in September 2023.

Wholesale prices remained above 1 percent since April. In FY24, the wholesale inflation averaged -0.7 percent, and the country experienced deflation in seven out of the 12 months.

The rise in wholesale inflation in recent months has been driven by food prices. Sequentially, food articles were up 0.86 percent in September, while the overall index rose 0.06 percent.

Potato and onion prices were up 78 percent in September from the previous year, while other vegetable prices rose 48 percent.

Manufacturing, which accounts for nearly two-thirds of the index, witnessed easing in inflation to a four-month low of 1 percent. On the other hand, fuel and light inflation declined to lowest level of -4.1 percent in 10 months.

"The sharp decline in Brent crude oil prices, which fell by 9% in September amid ongoing concerns regarding global demand, further intensified deflation in the fuel and power category," said Rajani Sinha, chief economist, CareEdge.

Economists expect wholesale inflation to average around 2-3 percent for FY25.

"Risks to food inflation have not fully abated completely and needs monitoring. Factors such as uneven monsoon, pre-harvest rainfall, and an increase in global edible oil prices add to the risks to food inflation," Sinha further added.

Geopolitical risks also weigh heavy on WPI, with economists noting that prices could end up higher if commodity prices rise.

"The near-term outlook for the WPI inflation remains susceptible to movements in global commodity prices. Any further flare up in geopolitical tensions, leading to an increase in commodity prices, could result in a faster-than-anticipated rise in the WPI inflation during H2 FY2025," said Nayar.