India’s wholesale price index (WPI)-based inflation surged to a four-month high of 2.36% in October 2024, marking a notable increase from September’s 1.84%. This rise comes after consistent inflation rates in August at 1.31% and July at 2.04%. The Ministry of Commerce & Industry’s report highlights that this spike is primarily driven by the cost of food articles, manufacturing of food products, machinery and equipment, motor vehicles, and other manufacturing sectors.
The October inflation increase is attributed to various elements:
Food inflation remains the primary driver, with specific subcategories showing significant rises:
Suman Chowdhury, Executive Director & Chief Economist at Acuité Ratings & Research, commented on the persistent rise in wholesale inflation: 'India’s wholesale inflation has shown a consistent increase over the past three months, with October reaching 2.36%. The Food Index, leading this surge, saw an 11.59% year-on-year growth, aligning with retail food inflation patterns. The decline in fuel inflation (-5.79%) has somewhat cushioned the inflationary impact, aiding in managing logistics and power costs.'
Chowdhury further noted the potential impact on monetary policy, highlighting that despite lower commodity prices helping to moderate overall inflation, the firm food inflation figures could delay the Reserve Bank of India’s anticipated rate cut in December 2024 and potentially into early 2025.
Analysts anticipate that the arrival of the kharif harvest and a positive rabi sowing season might temper food inflation in the coming months. Combined with current low commodity prices, this could help keep the WPI inflation below 3.0% for the fiscal year. However, caution is advised as persistent food price pressures have led to a revision in retail inflation forecasts, now expected at 4.8% for the current fiscal period.
The situation underscores the complexity of balancing inflation control with economic growth, presenting challenges for policymakers and market analysts alike.
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