DNA Money Edit: Early Diwali as WPI growth drops

Wholesale price index (WPI) inflation growth slowed in September, aided by a sharp fall in food and vegetable prices, bringing Diwali early to the government and the Reserve Bank of India. It rose 2.6% in September from a year ago, slower than the provisional 3.24% recorded in August, but higher than the growth of 1.36% posted in September last year.

The fall in vegetable prices is the prime reason for the decline in primary food inflation to 2% from 5.8%. Prices of some vegetables, such as tomatoes, which had risen sharply in July, corrected in September. Prices of cereals, wheat, pulses and potato dropped too. The downward swing of food inflation was, however, limited by rising prices of onion, vegetables and milk, among others.

The central government's reduction in excise duty on petrol and diesel by Rs 2 and the decision by some BJP-ruled state governments to reduce value-added tax are likely to help inflation for fuels slide in October. A favourable base effect aided the moderation in inflation for fuel and power.

What drives the future course of WPI includes an unevenly distributed monsoon, crude oil prices and the sharp fall in acreage of oilseeds that may lead to greater imports of edible oils.