India's wholesale inflation continued in the negative terrain for the sixth consecutive month as prices fell 0.26% in September, according to data released by the government.

"Deflation in September, 2023 is primarily due to fall in prices of chemical & chemical products, mineral oils, textiles, basic metals and food products as compared to the corresponding month of previous year," the ministry of commerce and industry says in a statement.

Wholesale inflation plunged below zero in April 2023, the first time since July 2020.

The Wholesale Price Index (WPI) in the fuel and power basket rose from -6.03% in August to -3.35% in September. Prices of mineral oils (3.67%) and electricity (0.51%) increased in September 2023 as compared to August. Prices of coal (-0.65%) declined in September as compared to August.

Wholesale inflation in manufactured products increased by around 100 basis points in September but stayed in the negative terrain at -1.34% compared with -2.37% in August.

Wholesale inflation in primary articles declined to 3.7% in September from 6.34% in August. Prices of crude petroleum & natural gas (10.31%) and non-food articles (0.86%) increased in September 2023 as compared to August. Prices of minerals (-4.92%) and food articles (-6.46%) declined in September 2023 as compared to August 2023.

Meanwhile, India's retail inflation eased to 5.02% year-on-year in September, according to the latest data by the National Statistical Office (NSO).

Earlier this month, RBI governor Shaktikanta Das said volatile energy and food prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook.

"I would like to emphatically reiterate that our inflation target is 4% and not 2 to 6%. Our aim is to align inflation to the target on a durable basis, while supporting growth. Our commitment to ensure financial stability reinforces our emphasis on price stability and anchoring of inflation expectations. This would keep inflation risk premium low and improve our competitiveness, productivity and growth potential," said RBI governor Das, while reading the monetary policy statement.

While near-term inflation is expected to soften on the back of vegetable price correction, especially in tomatoes, and the reduction in LPG prices, the future trajectory will be conditioned by a number of factors, according to Das. “For kharif crops, the area sown under pulses is below the level a year ago. Kharif onion production needs to be watched closely. Demand supply mismatches in spices are likely to keep these prices at elevated levels. The inflation trajectory will also be shaped by El Niño conditions and global food and energy prices. Together with global financial market volatility, these factors pose risks to the outlook,” said Das.

Taking into account these factors, CPI inflation is projected at 5.4% for 2023-24, with Q2 at 6.4%, Q3 at 5.6% and Q4 at 5.2%. CPI inflation for Q1 FY25 is projected at 5.2%.

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