The WPI is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.
Wholesale prices in India hit a four-month high at 5.28 percent in October from 5.13 percent in September, due to higher prices of certain crops and fuel, data released by the Commerce and Industry Ministry showed.
An uptick in prices of paddy, wheat is mainly due to the government’s decision to hike the minimum support price (MSP) 1.5 times the cost of production for the kharif crops.
Wholesale inflation, measured by the Wholesale Price Index (WPI), grew 3.68 percent in November, 2017.
The WPI is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.
Prices of fuel and power, which together have a weightage of 13.15 percent on the WPI, grew at 18.44 percent in October, as against a rise of 16.65 percent in September and 10.87 percent a year ago.
Any rise in prices of crude oil directly impacts inflation in India as the country meets most of its domestic demand for the commodity by importing it. Also, the recent depreciation of the rupee has only added to India's fiscal woes by increasing its import bill.
“The uptick in the WPI inflation in October, 2018 reflected the impact of the pass through of higher commodity prices and the INR (rupee) depreciation, whereas the disinflation in food prices had a much smaller impact on wholesale inflation than the CPI (consumer price index), given the difference in weights for food items in the two indices,” Aditi Nayar, Principal Economist at ICRA said.
Prices of primary articles — including food articles — which account for more than a fifth of the entire wholesale price index, stood at 1.79 percent, as against 2.97 percent in September.
Potatoes continued to remain expensive, with their prices rising 93.65 percent in October as against 80.13 percent in September. Similarly, wheat prices grew 9.49 percent from 8.87 percent in September, while cereals grew 6.24 percent in October from 5.54 percent a month ago.
However, prices of pulses, vegetables and onion continued to witness negative growth.
Experts believe that the disinflation in primary food items for the fourth month in a row, which is a cause for concern.
“The YoY disinflation in primary food items in October 2018 was driven by vegetables and protein items such as pulses, and egg, meat and fish. Whether the market prices for various crops move closer in line with the revised MSPs, would crucially impact the outlook for food inflation in the near term,” Nayar said.
Prices of manufactured products, which account for close to two-thirds of the index, grew 4.49 percent from 4.22 percent in September.
Core WPI inflation rose to 5.1 percent, a trend that experts believe is worrying as it reflects the impact of depreciation in domestic currency on landed price of imports.
“While the uptick in both the core-CPI and core-WPI inflation in October 2018 warrants some caution, the recent pullback in the INR and crude oil prices has softened the risks to the inflation trajectory,” Nayar said.
