Thursday, November 30, 2023

For 6th month in a row, wholesale inflation in India has been negative

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India’s Wholesale Price Index indicated ongoing negative wholesale inflation for the sixth consecutive month up to September, as per official data revealed on Monday. It had initially plunged into negative terrain in April this year and during the onset of the COVID-19 pandemic in July 2020.

The September wholesale inflation was recorded at (-) 0.26 percent, showing a slight improvement from the August figure of (-) 0.52 percent and a substantial recovery from July’s (-) 1.23 percent, according to data released by the Ministry of Commerce and Industry.

The decline in September’s deflation can be attributed primarily to reduced prices of chemical and chemical products, mineral oils, textiles, basic metals, and food products compared to the corresponding period of the previous year. The recent wholesale price index numbers follow the announcement by the statistics ministry on October 12 that headline retail inflation had declined to a three-month low of 5.02 percent in September.

The government regularly publishes wholesale price index numbers on the 14th of every month (or the next working day), compiled with data received from various institutional sources and selected manufacturing units nationwide.

Having peaked at 8.39 percent in October 2022, wholesale inflation has gradually decreased since then. Notably, the wholesale price index (WPI)based inflation had persisted in double digits for 18 consecutive months until September of the previous year.

Meanwhile, retail inflation in India returned to the Reserve Bank of India’s comfort level of 2-6 percent in September, although it remains slightly above the ideal 4 percent target. Retail inflation for September stood at 5.02 percent.

Apart from recent halts, the RBI has raised the repo rate by a cumulative 250 basis points since May 2022 in its battle against inflation. Increasing interest rates is a monetary policy measure typically employed to curb demand in the economy, thereby assisting in the reduction of the inflation rate.

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