Continuing decline in food prices, including vegetables, pulled wholesale price inflation to a five year low of 1.77 per cent in October.
The Wholesale Price Index (WPI) based inflation was at 2.38 per cent in September and 7.24 per cent in October 2013.
As per data released by the government today, the food inflation fell to a nearly two-and-half year low of 2.7 per cent. Food inflation is on decline since May.
The sharp drop in WPI inflation, which fell for the fifth month in a row, came at the back of retail inflation declining to a record low of 5.52 per cent in October.
“The WPI data released today indicate considerable softening in prices, which comes as a great relief. Equally important is to note the decline in CPI inflation rate reported earlier this week. A drop in prices was noted across all major segments indicating significant easing in inflationary pressures”, said Dr A Didar Singh, Secretary General, FICCI.
“The inflationary expectations are fairly tamed and we see no immediate upside risks with regard to prices. Given that, it is important to reiterate that demand remains subdued. The consumer durables segment reported negative growth for the fourth consecutive month in September 2014. It is extremely imperative that all levers are used to pep up demand”, added Singh.
“The government is committed towards achieving fiscal consolidation and this along with alleviated inflation creates room for a more accommodative stance from the Central Bank in terms of rate reduction in the policy to be announced next month”, pointed Dr. Singh.
The rate of price rise in onion contracted 59.77 per cent as compared to a contraction of 58.12 per cent in September.
In case of vegetables, the contraction was 19.61 per cent, while in protein rich items of egg, meat and fish it was 2.58 per cent in October.
During the month, inflation in potato stood at 82.11 per cent, against 90.23 per cent in the previous month.
Inflation in manufactured products, like sugar, edible oils, beverages and cement, fell to 2.43 per cent in October as against 2.84 per cent in the previous month.
The August WPI inflation was revised higher to 3.85 per cent from 3.74 per cent earlier, the data said.
Inflation in the fuel and power segment which include LPG, petrol and diesel declined to 0.43 per cent as compared to price rise of 1.33 per cent in September.
The Reserve Bank which maintained status quo in interest rate since January, will come out with the monetary policy review on December 2. The RBI factors in retail inflation while formulating its monetary policy.
The decline in both retail and WPI inflation for October, coupled with improvement in industrial output for September, will put pressure on the RBI to lower interest rates to boost growth.
An uptick in manufacturing and capital goods pushed industrial output to a three-month high of 2.5 per cent in September.
Industry has been demanding easing of interest rates to boost growth, which has slumped to 4.7 per cent in 2013-14. The economy is estimated to grow in the range of 5.4-5.9 per cent this fiscal.