WPI inflation in negative zone for 6th month in a row

India’s wholesale price index (WPI) based inflation remained in the negative zone for the sixth month in a row in September as prices of manufactured products, fuel and power declined during the month on a year-on-year basis, as per the government data released on Monday.

The annual WPI-based inflation stood at (-) 0.26 per cent in September. Though the general price level in the wholesale market has declined for the sixth consecutive month, the contraction in price in September was slower than in the previous month. WPI inflation stood at (-) 0.52 per cent in August. The wholesale price-based inflation has been in the negative since April.  

Manufactured products, which has 64.23 per cent weight in the WPI index, became cheaper by 1.34 per cent during the month under review, data released by the Ministry of Commerce and Industry showed.

However, there was a sequential rise in the prices of manufactured products. Deflation in manufactured products stood at 2.37% in August. “Manufactured goods witnessed a sequential rise in prices, indicating a recovery is underway in the sector,” said Mohit Rahlan, Chief Executive Officer, TIW Capital.
 Fuel and power became cheaper by 3.35% in September when compared with the price level of the same month last year. Fuel and power has 13.15% weight in the WPI. However, primary articles, which have 22.62% weight in the WPI, became costlier by 3.7% in September on a year-on-year basis.

Wholesale food inflation eased to 1.54% in September, sharply lower from 5.62% recorded in the previous month and 8.32% posted in July.

Food inflation has eased in the retail markets also in the recent months. Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, declined to 6.56% in September from 9.94% in the previous month and 11.51% recorded in July, as per data released by the National Statistical Office (NSO) last week.

Retail inflation as measured by the CPI eased to 5.02% in September from 6.83% in the previous month.

Deflation in September 2023 is primarily due to fall in prices of chemical & chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of previous year, the Ministry of Commerce and Industry said in a statement.  

One of the key reasons for deflation in recent months is high base. In September 2022, WPI based inflation stood at 10.55%.

“With the support of high base fading, some uptick in WPI inflation numbers could be seen in the second half of the fiscal year,” said Rajani Sinha, chief economist at CareEdge Ratings. “Elevated global crude oil prices and risk to kharif harvest from a skewed rainfall pose upside risks to WPI inflation,” she added.