India's wholesale price index increased by 2.6 percent on the year in September, down from 3.24 percent in August. The index fell 0.44 percent on the month in September after advancing 0.79 percent in August.
The moderation in WPI inflation in September mainly reflects weaker growth in food prices, which account for around 15 percent of the index. These grew by 2.04 percent on the year in September, down from 5.75 percent in August, with year-on-year growth in vegetable prices decelerating sharply from 44.91 percent to 15.48 percent. The year-on-year increase in fuel and power prices (around 13 percent of the index) also moderated from 9.99 percent to 9.01 percent, while inflation for manufactured products (around 64 percent of the total index) was slightly stronger, picking up from 2.45 percent in August to 2.72 percent in September.
CPI data for September, published last week, showed headline consumer inflation was unchanged at 3.28 percent in September, below the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. This stability, however, was also driven by weaker growth in vegetable prices, and officials continue to expect broader price pressures to build in the near-term.
At its most recent policy review, held earlier in the month, the RBI kept policy rates on hold but revised up its forecasts for headline consumer inflation in the current fiscal year, reflecting factors such as the newly-introduced goods and services tax and higher global oil prices. Officials also expressed concern that planned public sector pay rises could push headline inflation higher than currently expected, but note that food price increases may turn out to be weaker than anticipated.