Wholesale inflation remains in negative for fifth month at -0.52% in August

Inflation in food articles remained in double digit at 10.60% in August, lower than 14.25% in July. File
| Photo Credit: Mohammed Yousuf

India’s wholesale prices remained in deflationary mode for the fifth month in a row in August but the decline in prices eased to -0.52% from -1.36% in July, even as inflation in food and primary articles moderated to about 6% from over 7.5% in the previous month.

The dip in the deflation rate was largely driven by fuel and power prices, whose year-on-year decline more than halved from -12.8% in July to -6% in August.

Deflation in manufactured products dropped fractionally from -2.5% in the previous month to -2.4% in August.

On a month-on-month basis, the Wholesale Price Index (WPI) moved up for the second successive month, rising 0.33% in August compared to 2.01% in July. Sequentially, fuel and power costs actually rose 3% after several months of declines, while manufactured products prices rose for the first time in four months, albeit at a marginal pace of 0.14%.

The Commerce and Industry Ministry attributed the negative rate of inflation “primarily to the fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products”.

While the wholesale food index was up 5.6%, primary food articles inflation remained elevated at 10.6% in August after hitting a decade-high of 14.25% in July, with vegetable prices rising 48.4% compared to 62.1% in July.

Inflation in cereals eased to a three-month low of 7.25% in August, but paddy prices surged 9.2% and pulses by 10.5%, the highest pace in at least six months for both food items. Onion prices shot up 31.4% in August, compared to 7.1% in July. Milk inflation eased to a six-month low of 7.8% but was only marginally lower than the 8.15% recorded in July.

Economists expect wholesale inflation to rebound from the deflationary trend in coming months, which would also feed into pressures on inflation in consumer prices, which remained elevated at 6.83% in August. “Prices of crude oil, cereals and pulses are rising and industrial as well as consumer demand is holding up. This would keep CPI inflation in the range of 5.5%-6.5% over the next two quarters and not allow it to come down sharply,” said Suman Chowdhury, chief economist and head-research at Acuité Ratings & Research.