WPI inflation rises to 8-month high of 1.48% on pharma, metal prices

Source: Business Standard, Nov 16, 2020

New Delhi: The wholesale price index-based (WPI-based) inflation rate rose for the third straight month to an eight-month high of 1.48 per cent in October from 1.32 per cent in the previous month.

Economists said the WPI data enforced the case for the status quo in the Reserve Bank of India’s policy rates.

Unlike its consumer price index (CPI) counterpart, pressure did not come from food items in general.

These were manufactured products, particularly pharma and metals, that fuelled the WPI inflation rate.

Economists attributed it to a rise in demand due to festivals and after unlockdown was announced for more sectors from September onwards.

The food inflation rate in the WPI came down to 6.37 per cent in October from 8.17 per cent in the previous month.

It rose to 11.07 per cent from 10.68 per cent over the same period in the CPI.

“The rising retail food inflation rate and the declining wholesale food inflation rate are a nightmare for policymakers,” said Devendra Pant, chief economist at India Ratings.

Aditi Nayar, principal economist at ICRA, said the WPI data did not reveal any information that would build the case for a rate cut in December.

“In our view, the Monetary Policy Committee is likely to stay on hold in at least December if not in February too,” she said.

However, within the overall wholesale price food inflation rate, individual items behaved differently.

The WPI inflation rate in vegetables fell to 25.23 per cent from 36.54 per cent. However, onions saw prices increasing in October after a continuous fall for the previous four months.

The rate for onions stood at 8.49 per cent in October against a deflation (fall in prices) rate of 31.64 per cent in the previous month. Prices of potatoes continued to double in October over those of the same month in the previous year.

The inflation rate here rose to 107.70 per cent in October from 107.63 per cent.

Pulses also saw the inflation rate rising from 12.53 per cent in September to 15.93 per cent in October.

Fuel and power saw the deflation rate rising to 10.95 per cent in October from 9.54 per cent in the previous month.

For liquefied petroleum gas (LPG), the inflation rate fell to 2.86 per cent from 3.19 per cent over this period. Both petrol and diesel continued to see a fall in prices.

It was manufactured items, which have the highest weighting of 64 per cent in the WPI, that saw the inflation rate rising to 2.12 per cent from 1.61 per cent over this period.

Pressure came from pharmaceuticals, medicinal chemicals, and botanical products, which witnessed the inflation rate going up to 3.31 per cent from 2.70 per cent. However, the inflation rate in October was less than the 3.40 per cent in August.

The rate for basic metals rose to 5.32 per cent from 3.35 per cent over the period while mild steel and semi-finished steel saw it increasing to 4.85 per cent from 4.06 per cent.

As a result, the core inflation rate (that relates to non-food, non-fuel manufactured products) spiked to 1.7 per cent from 1 per cent during this period, led to a large extent by the base effect, said Nayar.

Pant said an increase in the core inflation rate suggested improvement in demand conditions after Covid-related lockdown was lifted.

“However, it will be too early to term this a general recovery. A large part of this is due to festival-related demand,” he said.

Retail inflation inches up to 7.61% in October on rising food prices

Source: Business Standard, Nov 12, 2020

New Delhi: Driven by rising food prices, retail inflation inched up to 7.61 per cent in October, remaining above the comfort level of the Reserve Bank.

According to the Consumer Price Index (CPI) data released by the government on Thursday, inflation stood at 7.27 per cent in September 2020. It was 4.62 per cent in October 2019.

The rise in general inflation was mainly on account of elevated food prices.

As per the data, the Consumer Food Price Index (CFPI) rose to 11.07 per cent in October, up from 10.68 per cent in the previous month of September.

The RBI, which mainly factors in retail inflation while arriving at key policy rates, has been mandated by the government to keep inflation at 4 per cent (+, – 2 per cent).

Retail inflation eases marginally for farm, rural workers in September

Source: The Economic Times, Oct 20, 2020

The retail inflation for farm workers and rural labourers eased only marginally to 6.25 per cent and 6.1 per cent, respectively in September as food prices remained high. The retail inflation for farm workers and rural labourers is measured in terms of Consumer Price Index-Agricultural Labourers (CPI-AL) and Consumer Price Index-Rural Labourers (CPI-RL).

Point-to-point rate of inflation based on CPI-AL and CPI-RL decreased to 6.25 per cent and 6.10 per cent in September from 6.32 per cent and 6.28 per cent, respectively in August, a labour ministry statement said.

The rise in index varied from state to state. In case of agricultural labourers, it recorded an increase of 1-23 points in 20 states, it said.

Tamil Nadu with 1,234 points topped the index table whereas Himachal Pradesh with 816 points stood at the bottom.

In case of rural workers, it recorded an increase of 2-20 points in 20 states. Tamil Nadu with 1,218 points topped the index table whereas Himachal Pradesh with 863 points was at the bottom.

The maximum increase in CPI numbers for agricultural labourers was experienced by Himachal Pradesh (+23 points) and in case of rural labourers, it was Jammu & Kashmir (+20 points) mainly due to rise in prices of wheat-atta, pulses, mustard-oil, milk, onion, chillies-dry, garlic, ginger, barber charges, bus fare, vegetables and fruits etc.
The All-India CPI Numbers for Agricultural Labourers and Rural Labourers for September 2020 increased by 11 points and 10 points to stand at 1,037 and 1,043 point, respectively, the statement added.

The major contribution towards the rise in general index of farm workers and rural labourers came from food, with (+) 9.20 points and (+) 8.95 points, respectively mainly due to rise in prices of arhar dal, masur dal, ground nut oil, mustard oil, vegetables and fruits etc.

“The easing of inflation successively for eight months will definitely improve income of millions of workers in rural areas by putting lesser burden on their daily budgetary requirement,” the statement quoted Labour Minister Santosh Gangwar as saying.

Wholesale Price Index inflation at 7-month high in September, up 1.3% as food prices rise

Source: Timesnownews.com, Oct 14, 2020

New Delhi: Wholesale Inflation as gauged by the Wholesale Price Index (WPI) index rose to its highest levels in seven months on the back of an increase in prices of food articles. In September 2020, WPI or wholesale inflation stood at 1.32% as compared to 0.33% during the corresponding period last year.

“The annual rate of inflation, based on monthly WPI, stood at 1.32% (provisional) for the month of September 2020 (over September 2019) as compared to 0.33% during the corresponding month of the previous year,” said a statement from Ministry of Commerce & Industry.

WPI inflation was in the negative territory for four straight months — April -1.57%, May -3.37%, June -1.81% and July -0.58%. It turned positive in August, increasing 0.33% in the previous month. 

Wholesale food prices were reported at eight-month high indicating supply-side disruptions in the lockdown months. Experts anticipate food inflation figures to cool-off in months ahead.

According to provisional data released by the Department for Promotion of Industry and Internal Trade (DPITT) on Wednesday, Inflation in food articles during the month was at 8.17% as compared to 3.84% in August.

According to data released earlier this week by MoSPI, retail inflation based on consumer price index (CPI) spiked to 7.33% in the month of September as against 6.69% in the month of August. Rural inflation has also risen to 7.43% and urban inflation has risen to 7.26%. India’s industrial production has declined by 8% due to lower output of mining, manufacturing and power generation sectors. India’s inflation rates have gone up as compared to August 2020. A rise in the urban and rural inflation rates has also been seen when compared to August data. The figures suggest how the overall inflation in India has gone up with the core focus being on retail.

Retail inflation at 8-month high in September; August IIP in negative zone

Source: Business Standard, Oct 13, 2020

Pune: Days after the Reserve Bank of India (RBI) predicted gradual easing of retail inflation, consumer price index-based inflation for September came in at 7.34 per cent, from 6.69 per cent in the previous month on account of rising food prices. This marks the highest level recorded in eight months, and well above the RBI’s target range of 2-6 per cent. Though moderation is expected after the kharif harvest, an uptick in inflation when economic recovery is underway is troublesome. Food inflation at 10.68 per cent in September, against 9.05 per cent in the previous month, is the crux of worry.

Another key barometer of the economy, the Index of Industrial Production declined 8 per cent in August. Industrial activity bore the brunt of localised lockdowns and work restrictions in August, chipping away nearly a tenth of the factory output.

Indian consumers brace for high inflation as they curb spending

Source: The Economic Times, Oct 12, 2020

Consumers in India expect inflation to remain high over the next year, further hindering their ability to spend at a time when confidence is at a record low because of job losses and wage cuts.

Households’ median inflation expectations over a one-year period remained elevated at 10.3%, according to the latest survey from the Reserve Bank of India. A separate study showed consumer confidence, as measured by the current situation index, falling to an all-time low of 49.9 in September.

The findings mirror a broader divergence between consumer and wholesale inflation in the economy. The latter reflects subdued factory gate prices because of a slump in demand amid the pandemic, while retail prices continue to surge above the central bank’s 2% to 6% target band because of supply side shocks and costlier food and fuel. The RBI’s goal is to keep retail inflation at the 4% midpoint of the target range.

Data due later Monday will probably show retail inflation accelerated to 6.9% in September, while WPI figures — scheduled for release on Wednesday — are likely to show factory-gate inflation at 0.9%, up from 0.16% in August.

“Manufacturing firms polled in the July-September 2020 round of the Reserve Bank’s industrial outlook survey expected selling prices to remain unchanged in the third quarter of the financial year on the back of benign input cost pressures,” the central bank said.

The central bank, which last week kept interest rates unchanged, forecasts consumer price-growth to ease to 4.5% in the first three months of next year, and slow to 4.3% in the following quarter.
Although inflation has been above the targeted range, “the MPC judges that the underlying factors are essentially supply shocks which should dissipate over the ensuing months as the economy unlocks, supply chains are restored and activity normalizes,” the central bank said.

August retail inflation at 6.69 per cent

Source: The Economic Times, Sept 15, 2020

New Delhi:India’s retail inflation cooled marginally to 6.69% in August but stayed well above the 6% outer band of the central bank’s inflation target, likely ruling out the possibility of a near-term rate cut.

The rate of inflation – as measured by the Consumer Price Index (CPI) — was 6.73% in July.

It stood at 3.28% in August 2019.

The Reserve Bank of India’s monetary policy committee (MPC) had left the repo rate – the rate at which it lends to banks — unchanged at 4% in its last review meeting in August.

The central bank has a 4% consumer inflation rate target, with a two-percentage point band on either side. CPI inflation has been above the 6% mark since April.

The government revised downward the headline CPI number for July from 6.93% earlier.
Food inflation, led by vegetables, pulses, oils, and meat & fish, was 9.05% last month, lower than 9.27% in July.

Urban inflation at 6.8% was above the national average but also higher than 6.66% registered in rural areas in the past month.

Separately, released data by the commerce and industry ministry showed that India’s wholesale inflation turned positive in August for the first time since March, reflecting a recovery in producers’ pricing power.

Wholesale Price Index (WPI) inflation rose to 0.16% in August from a 0.58% contraction in July, as inflation for manufactured items advanced to 1.27% from 0.51% from the trailing month.

WPI was 1.17% in August 2019.

“It may be seen that as various pandemic-related restrictions were gradually lifted and nonessential activities started resuming operations, availability of price data has also improved,” the National Statistical Office (NSO) said in a statement on Monday.

Retail inflation will come down to below 4% only after Dec: SBI report

Source: Business Standard, Sept 10, 2020

New Delhi: Attributing the recent surge in retail inflation to huge government procurement and supply disruptions on account of the Covid-19 pandemic, an SBI report said that the price rise was likely to come down to below 4 per cent only after December.

The Consumer Price Index (CPI) inflation rate during August, the data for which is yet to be released, was likely to remain at about 7 per cent, said SBI Ecowrap. The data is scheduled to be released on Monday.

According to government data, the retail inflation rose to 6.93 per cent in July, mainly driven by rising prices of food items like vegetables, pulses, meat and fish. It was 3.15 per cent in the corresponding month last year.

“We expect August inflation numbers to be elevated at around 7 per cent or even higher and if the base effect is the primary reason, inflation could only come down to below 4 per cent possibly beyond December,” the SBI report said.

However, the report further said that it looks difficult to believe that supply disruptions would normalise against the huge upsurge in pandemic in rural areas and this now poses an upside risk to inflation numbers.

“We are thus less hopeful of any rate cut in current fiscal/at best 25 bps as February MPC meeting would consider December inflation only,” it said.

The Reserve Bank of India, which mainly factors in retail inflation while arriving at its monetary policy, had kept the short-term lending rate unchanged to help tame inflation last month.

The report postulate that the jump in food prices is largely because of huge procurement by government and supply disruption that pushed up prices of cereal, potato, tomato and protein items.

It further said as inflation targeting comes up for review in 2021, “we believe, one way to make inflation targeting successful in the Indian context as time goes by is to reach the 4 per cent target over a particular business cycle rather than for a particular date…” This would encourage predictable inflation targeting in the face of persistent negative shocks, and recently the US Federal Reserve also espoused such a conviction, it said. The RBI has been tasked by the government to keep inflation at 4 per cent (+,- 2 per cent).

RBI expects inflation to firm up further in coming months

Source: The Economic Times, Aug 25, 2020

Mumbai: Country’s headline inflation is expected to firm up further in the coming months largely due to disruptions in food and manufactured items’ supply chains, the Reserve Bank of India said in its annual report for 2019-20 released on Tuesday.

The Reserve Bank of India (RBI) said headline inflation picked up strongly during the closing months of 2019-20 and the short-term outlook for food inflation has turned uncertain.

“Disruptions in food and manufactured items’ supply chains could amplify sectoral price pressures, thus posing an upside risk to headline inflation. Heightened volatility in financial markets could also have a bearing on inflation,” said the RBI Annual Report 2019-2020.

All of these may influence inflation expectations of households, which are adaptive in nature, and show significant sensitivity to shocks to food and fuel prices, the report said.

Monetary policy, therefore, has to keep a constant vigil on price movements, especially as they can translate into generalised inflation.

According to government data, retail inflation rose to 6.93 per cent in July, mainly driven by rising prices of food items like vegetables, pulses, meat and fish.
In its monetary policy review earlier this month, RBI had said that the retail inflation is expected to be at elevated levels during the second quarter, but may ease in the second half of the current fiscal year.

Supply chain disruptions persist, resulting in inflation pressures across segments, RBI Governor Shaktikanta Das said while announcing the decisions taken by the central bank’s Monetary Policy Committee (MPC) on August 6.

Going by the trend of global commodity price developments and weak demand conditions, consumer price inflation remained benign during 2019 and early 2020 in a number of economies the overall headline inflation was subjected to higher volatility in 2019-20 relative to the previous four years, underpinned by high flux in food prices, RBI said.

Within the food group, price spikes for different items occurred at different time points. The seasonal behaviour has changed in the case of prices of many food items such as, onion, ginger, brinjal, cauliflower, okra and green peas.

Interestingly, despite being the most volatile item, seasonality in onion prices has declined significantly over the years, partly reflecting improvement in cold storage facilities, RBI said.

“As the COVID-19 pandemic spread across the globe, all commodity prices dipped. The shutdown of industries in China in February 2020 and later in Europe and the US led to a fall in demand for metals, easing their prices.

“Prices of food items like palm oil, soy oil, sugar and corn also declined with retrenchment in demand for ethanol and bio-diesel as crude oil prices declined,” the report said.

Retail inflation for farm, rural workers drops in July

Source: The Economic Times, Aug 20, 2020

Retail inflation for farm and rural workers eased to 6.58 per cent and 6.53 per cent, respectively in July this year on account of lower prices of certain food items, the labour ministry said on Thursday.

Inflation based on CPI-AL (Consumer Price Index-Agricultural Labourers) and CPI-RL (Consumer Price Index-Rural Labourers) stood at 7.16 per cent and 7 per cent, respectively in June.

Inflation based on food index of CPI-AL and CPI-RL recorded at 7.83 per cent and 7.89 per cent, respectively in July 2020, according to a labour ministry statement.

Amongst states, the maximum increase in the consumer price index numbers for agricultural labourers was experienced by Meghalaya (15 points) and for rural labourers, it was experienced by Jammu & Kashmir and Meghalaya (14 points) mainly due to rise in the prices of milk, meat goat, fish dry, bidi, vegetables and fruits and bus fare etc, the statement said.

On the contrary, the maximum decrease in the CPI numbers for agricultural labourers and rural labourers was experienced by Tripura (-8 points) and (-5 points), respectively mainly due to fall in the prices of rice, meat goat, fish fresh/dry etc.

The all-India consumer price index numbers for agricultural labourers and rural labourers (base:1986-87=100) for the month of July 2020 increased by 3 and 4 points to stand at 1,021 and 1,028Â points, respectively, the statement said.
The major contribution towards the rise in general index of agricultural labourers and rural labourers came from food, with 2.49 points and 2.64 points, respectively mainly due to rise in prices of arhar dal, masur dal, ground nut oil, meat goat, poultry, vegetables and fruits etc.

The rise/fall in index varied from state to state.

In case of agricultural labourers, it recorded an increase of 1 to 15 points in 17 states and a decrease of 3 to 8 points in 3 states.

Tamil Nadu with 1,216 points topped the index table whereas Himachal Pradesh with 786 points stood at the bottom.

In case of rural labourers, it recorded an increase of 1 to 14 points in 15 states and a decrease of 1 to 5 points in 4 states while it remained stationary in Rajasthan. Tamil Nadu with 1,202 points topped the index table whereas Himachal Pradesh with 838 points stood at the bottom.

Commenting on this, Labour Minister Santosh Gangwar said, “Despite the unfavorable situation in the country owing to the COVID-19 pandemic, the measures taken by the government have been able to control the inflation during this period.”

Labour Bureau Director General D S Negi said, “The increase in the index will have a positive impact on the wages of millions of workers working in the unorganised sector in rural areas.

“Labour Bureau has been able to bring out the monthly indices as per the pre-defined schedule consistently even during the tough time of COVID-19,” Negi added.