Economists said the recent cut in fuel tax rates by the government could lower pressures on households and companies in the short term, but firms are trying to pass on rising costs as domestic demand picks up.
India’s annual wholesale price-based inflation, a proxy of producers’ prices, accelerated in October to a five-month high, pushed up by increases in fuel and manufacturing prices, fuelling concerns of rising inflationary pressures for firms. The gap between retail and wholesale price-based inflation has widened in recent months as many companies and retailers are still trying to absorb galloping input costs that threaten to hit their bottom lines. Annual wholesale price-based inflation in October rose to 12.54% from the previous month’s 10.66%, remaining in double-digits for the seventh month in a row, government data showed on Monday.
Consumer prices based on inflation, the main gauge monitored by the monetary policy committee of the Reserve Bank of India, rose 4.48% in October from the same month last year, speeding up from September’s 4.35%, separate data released on Friday showed. Economists said the recent cut in fuel tax rates by the government could lower pressures on households and companies in the short term, but firms are trying to pass on rising costs as domestic demand picks up.
In the April-June quarter, the economy grew an annual 20.1%, and the central bank expects GDP to expand 9.5% in the current fiscal year ending in March 2022. Wholesale fuel and power prices rose 37.18% in October year-on-year compared with 24.81% in September, while manufactured product prices rose 12.04% compared with 11.41% in the previous month, data showed.
Wholesale prices of food accelerated at a 3.06% pace in October from a year earlier compared with 1.14% in the previous month. The RBI’s monetary policy committee is scheduled to meet Dec. 6-8 and is widely expected to leave the repo rate unchanged at 4%.