Wholesale prices in India rose 1.48 per cent in October, after rising 1.32 per cent in the previous month. It is the third annual increase in a row, taking the WPI growth to an 8-month high level. As the economy started to unlock, the wholesale prices also started to rise. While the prices of the manufacturing items significantly rose in the month, the rise in food prices has moderated. The rate of inflation based on WPI Food Index fell from 6.92 per cent in September 2020 to 5.78 per cent in October, while WPI manufacturing rose at 2.12 per cent, compared to 1.61 per cent in September 2020. Even as the wholesale food index grew at a slower pace, it is still a concern for wholesale and retail prices.
Food prices do not seem to be moderating contrary to earlier expectations, and from just fruits and vegetables the price surge has moved to all the major food components as well, said Joseph Thomas, Head of Research – Emkay Wealth Management. This may have an impact on the trajectory of interest rates, and RBI may have to continue to focus on liquidity provision rather than rate action and it is also a fact that the economy is going through unprecedented economic developments and therefore one may expect a relatively higher price level, he added.
Meanwhile, the annual retail inflation in India rose to 7.61 per cent in October 2020 from 7.34 per cent in the previous month. CPI rose at the highest rate since May 2014, and remained above the RBI’s comfort range of 2-4 per cent for the seventh straight month. The retail inflation was mostly shot up by high food prices in the month. Food inflation surged to 11.07 per cent, which is the highest since January.