WPI Inflation in India Hits 4-Month High at 2.4% in October, Driven by Food Prices - Read Now
India's WPI inflation rose to 2.4% in October, led by food price increases, especially in vegetables and staple items. Retail inflation also climbed, surpassing RBI's tolerance range. Manufactured goods saw moderate inflation, with non-food items declining in price.
India's WPI or Wholesale Price Index inflation rose to a four-month high in October 2024 at 2.4%. Food prices were the main contributors here. Within October 2024, inflation has been higher than expected because of this, as retail inflation or Consumer Price Index increases correspondingly, owing to this, rooted in the intrinsic inflationary pressures of food cost factors.
WPI Inflation Sees Spike in October 2024
Of particular interest, the WPI inflation rate jumped to 2.4%, and a Bloomberg poll of economists had this pegged at 2.3%. On a sequential basis, WPI continued to move upwards at a pace of 0.97%, the sharpest since June and for the first time in six months that it had to accelerate since inflation eased.
Primary observations from the data were that food prices contributed significantly to the spurt in October inflation.
The primary food articles and the overall food group, which have been at 15.3% and 24.4% of the WPI basket, respectively, reflected steep price increases, with primary food articles up at 13.5% from 11.5% in September, and the food group overall up at 11.6% from 9.5%.
It was still the cases of vegetables that recorded the highest inflation rate at 63%, with potatoes recording an upward trend in inflation at 78.7% from September's 78.1%, while the menu prices of onions experienced slight relief as inflation eased down to 39.3% from the previous month's 78.8%.
Overall, primary food articles have witnessed a massive price increase as WPI inflation for that category has risen to 13.5% in October from 3.2% in September. This rise in food inflation bodes well as both the households and policymakers are into a tight spot.
Retail Inflation (CPI) Turns to be on the Rise; Troubles for RBI as it Rises Above the Tolerance Level
India's retail inflation also didn't trail behind with CPI going to 14 months' high at 6.2% in October. It has now breached the RBI tolerance band at 2-4% for the first time since August 2023, leaving a cause of concern for prolonged inflationary pressure.
Manufactured goods show moderate rates of inflation.
Manufactured products, accounting for 64.2% of the WPI basket, registered inflation at 1.5% in October, as against the level at 1% recorded in September. Surprisingly, prices of non-food manufactured products have been falling for the sixth consecutive month, which implies the cost of the industrial segment is falling. This fall in the price of non-food items is likely to mean that input prices for industrial production are lower-the implications for aggregate inflation are noted hereafter.
Economic Consequences of Increased Inflation
The new trends of inflation do pose challenges for and opportunities for the Indian economy. While food prices are driving up both wholesale and retail inflation, the contraction in non-food manufactured goods' prices offers some comfort to industries dependent on these inputs. Policymakers may begin to feel mounting pressure to balance growth with price stability, especially because food inflation continues to drive upwards household budgets and retail prices continue to exceed RBI's tolerance range.
October WPI shocks analysts
Analysts had expected a mild uptick in the October WPI inflation series, but the levels recorded were not something they had imagined. There was an increase in food prices as everyone had foreseen, but its magnitude seems to indicate sustained cost pressures. Economists are keeping an eye on WPI trends to see if such inflationary forces could spill over into other industries, and affect longterm growth.