The wholesale price inflation (WPI) rose to an eight-month high of 1.48% in October as vegetable prices remained high, pushing up costs in the manufacturing sector. In February the WPI had shot up to 2.26%.

"The prices of primary articles will have a cascading effect on the price of all goods across sectors. So the consumer price index needs to be monitored closely," said Federal Bank executive director Ashutosh Khajuria.

The data from the Ministry of Commerce & Industry showed that the manufacturing segment that used vegetable and animal oil and fats for its products showed a sharp rise to 20.50% in October from -1.85% a year ago. Though the price of some food products such as milk, eggs and meat softened due to the base effect, vegetable prices continued to remain high.

"The WPI inflation recorded a fairly broad-based quickening to a higher-than-expected 1.5% in October 2020. This uptick was primarily driven by a jump in the core inflation to an 18-month high 1.7% in October 2020 from 1.0% in September 2020. However, food inflation recorded a welcome cooling in October 2020 that was only partly base-effect led," said ICRA economist Aditi Nayar.

After remaining steady at 4-4.5%, food inflation doubled to 8.2% in September as vegetable prices, especially the price of potatoes, rose sharply. Prices of cereals, fruits, eggs and meat showed a decline over the previous month, according to the ministry.

"The WPI inflation is expected to remain stable in the next print, before recording base effect-related volatility over the rest of this fiscal. In our view, the core inflation will continue to record a steady uptick in month-on-month terms over the next few months, with the strengthening of the economic recovery, while food prices will remain dominated by the trend displayed by vegetables," Nayar added.