Wholesale inflation hits 4-month high at 2.36% in October

The annual rate of inflation based on all India Wholesale Price Index (WPI) numbers or wholesale inflation inched up to a four-month high of 2.36% from 1.8% in September 2024, according to the latest data released by the Ministry of Commerce & Industry.

The ministry has attributed the surge in WPI in October 2024 to an increase in prices of food articles, manufacture of food products, other manufacturing, manufacture of machinery & equipment, manufacture of motor vehicles, trailers & semi-trailers, etc.

The food inflation alone has pushed the headline WPI print up by as much as 63 bps between September and October 2024. "WPI inflation inched up to a four-month high, similar to ICRA’s expectations (+2.5%). This was primarily led by the inflation in food items, which surged to 11.6% in October 2024, printing in double-digits after a gap of 25 months," says Rahul Agrawal, senior economist at the ratings agency ICRA.

The core (non-food manufacturing) WPI inched up mildly by 0.1% on a sequential basis in October 2024, similar to the uptick seen in the previous month. On a year-on-year (YoY) basis, the core WPI print rose to 0.3% in October 2024 from 0.1% in September 2024, while remaining muted.

"The WPI-food inflation print is expected to revert to sub-10% levels in November 2024, amid a favourable base, while remaining elevated in the month. The available data on daily wholesale prices points to a softening in the YoY inflation prints across 13 of the 22 items in November 2024 so far vis-à-vis October 2024, even as onions and edible oils remain a concern," says Agrawal.

Amid the expected softening in food inflation, the ratings agency has estimated the wholesale inflation to ease to 2.0% in November 2024. In the months to come, the robust increase in kharif output for most food items and the healthy outlook for rabi crops amid elevated reservoir levels, is expected to augur well for the WPI food inflation prints. "However, the outlook for the headline WPI inflation remains vulnerable to movements in global commodity and crude oil prices," says Agrawal.

Retail Inflation at 14-month high

The retail inflation data released by the government on November 13, 2024, also showed the headline inflation surging to a 14-month high of 6.2% in October 2024, breaching the upper limit of the MPC's medium-term target range of 2-6%. The CPI inflation rose from September's inflation rate of 5.5%.

The food and beverages inflation surged to an eye-watering 9.7% in October 2024 from 8.4% in the previous month, amid an uptick in 7 of the 12 food groups. Vegetables inflation hardened to a 57-month high of 42.2% from 36% in September 2024, which weighed on the food and beverages and, consequently, the headline inflation prints in the month.

RBI governor Shaktikanta Das in last month's monetary policy committee meeting had said that it had taken "a lot of effort" to contain the inflation horse i.e., closer to the target within the tolerance band compared to its heightened levels two years ago. "We have to be very careful about opening the gate as the horse may simply bolt again. Going forward, we need to closely monitor the evolving conditions,” he said. However, the current surge in CPI inflation may add to the worries of the central bank.