Wholesale Inflation rises to 1.84% in Sept amid surge in food prices

India’s wholesale inflation accelerated to 1.84% in September, up from 1.31% in August, driven largely by a surge in food prices, according to government data released on Monday. The Wholesale Price Index (WPI) for September 2023 was reportedly, recorded at 0.26%, reflecting continued inflationary pressures in the economy.
The rise in food prices was particularly significant, with the inflation rate in this segment rising to 9.47% in September from 3.26% in August. Vegetable prices saw a sharp increase, jumping 48.7% compared to a 10% drop in the previous month. Cereal prices also remained high, though slightly eased, rising 8.1% in September from an 8.4% increase in August. Fuel and power deflated in September with prices falling over 4 per cent when compared to 0.67 per cent in the previous month, stated release.
Food Prices Remain a Major Concern
Food inflation continues to be a major concern, with experts pointing to their significant influence on overall inflation levels. Given that a large portion of India’s 1.4 billion population spends a majority of their income on food, any rise in food prices tends to have a substantial impact on inflation. The rising cost of key vegetables like onions, tomatoes, and potatoes has become particularly problematic. A recent analysis by Crisil indicated that the cost of a vegetarian meal (thali) in India rose by 11% in September compared to the previous year. The ongoing volatility in food prices, exacerbated by weather conditions, could further strain economic stability, noted experts.
Primary Articles and Manufactured Goods See Mixed Trends
According to information,the inflation rate for primary articles—another key category in the WPI—accelerated to 6.59% in September, up from 2.42% in August. Manufactured products, which hold the largest weight in the WPI, experienced a more modest inflation rate of 1%, slightly down from 1.22% in August.
The WPI serves as a broad measure of price movements at the wholesale level, tracking the cost of a representative basket of goods. It is divided into three major components: primary articles (22.6% of the total weight), fuel and power (13.2%), and manufactured products (64.2%).
RBI’s Cautious Stance Amid Inflation Risks
The Reserve Bank of India (RBI), in its latest bulletin,  noted that the volatility in food prices remains a contingent risk, even as the recent easing in retail prices may support private consumption. The RBI’s Monetary Policy Committee (MPC) recently held the repo rate unchanged, adopting a neutral stance to maintain flexibility amid evolving inflation and growth trends.
According to information, the RBI has adjusted its inflation projections for the remaining quarters of the fiscal year, forecasting inflation at 4.1%, 4.8%, and 4.2% for Q2, Q3, and Q4, respectively. In contrast, the August projections were slightly higher, pegging inflation at 4.4%, 4.7%, and 4.3%. For the first quarter of the next fiscal year, inflation is expected to average 4.3%.India’s food inflation has averaged 6.3% between June 2020 and June 2024, significantly higher than the 2.9% average seen in the previous four years. While food inflation eased in July and August due to base effects, it has surged again, presenting a renewed challenge for policymakers.
Meanwhile, the RBI expressed concern over the volatility of food prices but also noted that the recent easing of retail prices could help boost private consumption. The MPC, in its latest decision, retained the repo rate and announced a shift from its "withdrawal of accommodation" stance to a "neutral" stance, granting it more flexibility to respond to inflation while balancing growth.The central bank's neutral stance indicates a careful balancing act between controlling inflation and supporting economic growth, especially as global uncertainties and domestic inflationary pressures persist, noted analysts.

(Business Correspondent)