WPI inflation rises to 5-month high of -0.52% in August

The wholesale inflation data comes two days after the statistics ministry said headline retail inflation eased to 6.83 percent in August.

India's wholesale inflation remained in the deflationary zone for the fifth month in a row in August, data released on September 14 by the commerce ministry showed, although the Wholesale Price Index (WPI) inflation rose to a five-month high of -0.52 percent.

WPI inflation stood at -1.36 percent in July.

The wholesale inflation data comes two days after the statistics ministry released Consumer Price Index (CPI) data for August on September 12, which show India's headline retail inflation rate cooled to 6.83 percent from July's 15-month high of 7.44 percent.

However, while the general index of the CPI declined 0.1 percent month-on-month (MoM) in August, the all-commodity index of the WPI rose 0.3 percent sequentially.

Driving the momentum in wholesale prices in August was the fuel and power category. While its year-on-year inflation rate remained rooted below zero, the fuel and power index was up nearly 3 percent MoM. Similarly, inflation for manufactured products was also below zero at -2.37 percent in August. However, the index for these category of goods was up 0.1 percent MoM, indicating rising price pressures.

The dynamic was different in the third major category - primary articles, which mostly comprises food items. In August, primary articles inflation was 6.34 percent, but its index was down 0.5 percent MoM. Specifically among food items, wholesale vegetable inflation reduced to 48 percent in August from 62 percent in July as their prices fell 8.3 percent MoM.

However, within vegetables, the index for onion was up 24 percent MoM while that of potato also rose by 0.5 percent. But this was more than nullified by the 19.6 percent decline seen in tomato prices.

Retail inflation data for August had shown similar movements, with the price index for potato up 2.3 percent from July, while that of onion was 12.3 percent higher, even as the tomato index was down 21.7 percent MoM.

However, as was the case with consumer prices, wholesale prices of cereals and pulses rose by 1.6 percent and 3.0 percent, respectively, in August compared to July.

Also Read: Deutsche Bank sees India's CPI inflation dipping below 3% in July 2024

While the government has taken multiple measures in an attempt to cool food prices, the Reserve Bank of India (RBI) has chosen to look through the recent spike in prices and termed it as a temporary problem due to demand-supply mismatch and the weather. As such, even as the RBI raised its CPI inflation forecast for 2023-24 by 30 basis points to 5.4 percent on August 10, its Monetary Policy Committee (MPC) left the repo rate unchanged at 6.5 percent for the third meeting in a row.

Economists expect CPI inflation to fall below 6 percent in September and fall rapidly thereafter.