India's wholesale price inflation dips 1.21% in October
What's the story
India's wholesale price inflation (WPI) has dipped to -1.21% in October, according to government data released on Friday. This is a significant drop from the previous month's inflation rate of 0.13%. The decline is primarily attributed to lower prices of food articles, fuel, and manufactured goods. Last year in October, WPI-based inflation stood at 2.75%.
Price drop
Deflation in food articles
The deflation in food articles stood at 8.31% in October, a sharp rise from September's 5.22%. Onions, potatoes, vegetables, and pulses all witnessed a price decline during this period. The industry ministry attributed the negative inflation rate to falling prices of food articles as well as crude petroleum & natural gas, electricity, mineral oils, and basic metals manufacturing.
Broader impact
Changes in WPI inflation
Inflation for manufactured products eased to 1.54% in October, down from September's 2.33%. Meanwhile, fuel and power witnessed a deflation of 2.55%, slightly lower than the previous month's deflation rate of 2.58%. The changes in WPI inflation are in line with the recent Goods and Services Tax (GST) rate cuts effective from September 22.
Tax effects
GST rate cuts impact
The GST rate cuts on daily use mass consumption items have contributed to the fall in both wholesale and retail inflation. The four-tier tax structure was simplified into two slabs of 5% and 18% as part of this rationalization. Last week, data showed that retail inflation hit a record low of 0.25% in October, mainly due to the impact of these GST rate cuts and a favorable high base effect from last year.