Wholesale prices decline for sixth straight month to 0.3% in September

Wholesale prices declined for the sixth consecutive month in September to 0.26% from 0.52% in August, even as a rise in commodity prices pushed the prices of manufactured products sequentially for the second consecutive month.

Experts indicate that the uncertainty in commodity prices is expected to keep the Reserve Bank of India on a prolonged pause.

“The sequential rise in the WPI for manufactured products bears watching if producers pass on higher costs into retail prices. As of now, firm surveys indicate the pace of increases in selling prices is lower than that in input prices,” said Rahul Bajoria, Head EM Asia (ex-China) Economics, Barclays.

Manufactured products, which account for nearly two-thirds of the index, rose 0.4% in September compared with the previous month; however, on a yearly basis, manufacturing prices were still 1.34% lower.

“We expect the RBI to remain on a prolonged pause as it monitors uncertainty on the commodity front, both in domestic non-perishable food prices and international energy prices,” said Bajoria.

The decline in the wholesale index was driven by food prices, which eased more than expected in September.

Last week, retail inflation had also eased more than expected to 5% after two consecutive months of near 7% print.

“Elevated global crude oil prices and risk to kharif harvest from a skewed rainfall pose upside risks to WPI inflation,” said Rajani, chief economist, CareEdge, a ratings agency, pointing that fading base effects may also lift wholesale inflation.

Sinha, however, expects inflation to average below 1% for FY24, as a weak China demand keeps commodity prices contained.

In its latest forecast, the International Monetary Fund had projected the Chinese economy to expand by 5% in 2023, lower than the 5.2% projected earlier. IMF had raised India’s FY24 forecast to 6.3%.

Highs and lows
The prices of food articles eased to 3.35% from 10.6% in the previous month on account of a 15% deflation in vegetables, but cereals, pulses and milk continued to post high inflation.

Pulses inflation quickened to a four-year high of 17.69% compared with 10.45% in August, whereas milk inflation rose to 8.58% compared with 7.79%.

“This indicates price pressures in food persist, despite some cooling of the seasonal price surge,” said Bajoria.

Fuel prices declined again in September, despite wholesale petrol prices witnessing a 1.24% inflation for the first time since May 2023.

Lower for longer
- Sixth straight month of contraction in WPI basket
- Sharp decline in food prices contributes to deflations
- WPI could average less than 1% this year

% change, y-o-y	WPI
Apr-22	16.63
May-22	16.23
Jun-22	15.38
Jul-22	14.07
Aug-22	12.48
Sep-22	10.55
Oct-22	8.67
Nov-22	6.12
Dec-22	5.02
Jan-23	4.8
Feb-23	3.85
Mar-23	1.41
Apr-23	-0.79
May-23	-3.61
Jun-23	-4.18
Jul-23	-1.23
Aug-23	-0.52
Sep-23	-0.26

(% change, y-o-y)	Aug-23	Sep-23
Food Articles	10.6	3.35
Vegetables	48.39	-15
Onion	31.42	55.05
Pulses	10.45	17.69
Fuel & power	-6.03	-3.35
Petrol	-2.13	1.24
Manufactured Products	-2.37	-1.34

Source: Ministry of Commerce

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