India’s Wholesale Price Index (WPI)-based inflation rate continued its downward trend, reaching a three-month low of -0.52% in October. This marks the seventh consecutive month of deflation, with various factors contributing to the sustained negative trajectory.
Factors Driving WPI Deflation:
The persistent deflation in factory gate prices can be attributed to the high base effect and declines in the prices of several key sectors. Notably, chemicals, chemical products, electricity, textiles, basic metals, food products, and paper and paper products have experienced reductions in prices compared to the same period in the previous year.
Food Inflation Decline:
In October, food inflation witnessed a decrease from 3.35% in the previous month to 2.53%. This disinflation in food prices is primarily linked to the ongoing contraction in the prices of vegetables (-21.04%) and potatoes (-29.3%). Additionally, prices of wheat (4.75%) and milk (7.92%) decelerated, while cereals (7.51%), paddy (9.39%), pulses (19.43%), onion (62.6%), and eggs, meat, and fish (2.7%) experienced accelerated inflation during the month.
Manufactured Products Deflation Continues:
The data reveals that the contraction in prices of manufactured products (-1.13%) persisted for the eighth consecutive month in October, compared to -1.34% in September. This contraction was led by decreases in the prices of food products, vegetable and animal oil, textiles, paper, chemicals, metals, rubber, and steel.
Fuel Prices Contraction and Acceleration:
Fuel prices witnessed a continued contraction (-2.47%) for the sixth consecutive month, driven by decreases in liquefied petroleum gas (-4.03%) and high-speed diesel (-6.8%). However, petrol prices saw an acceleration (3.45%) for the second consecutive month.