India’s wholesale inflation eased to a four-month low at 1.31 per cent on an annual basis in August from 2.04 per cent in July, as fuel prices turned negative and the pace of rise in food prices slowed.
In August 2023, wholesale inflation was recorded at (-)0.46 per cent.
The wholesale inflation, measured using the Wholesale Price Index, was expected to moderate to 1.85 per cent, according to a Reuters poll.
Fuel and power saw a deflation in August with prices falling 0.67 per cent in August, as against 1.72 per cent rise in July, government data showed. Food prices, a key indicator, slowed to 3.26 per cent in August from 3.55 per cent in the previous month.
The government however attributed the ‘positive rate’ of inflation in August primarily due to increase in prices of food articles, processed food products, other manufacturing, manufacture of textiles and manufacture of machinery & equipment etc.
In August, India’s retail inflation inched up marginally to 3.65 per cent, fuelled by food and pricier vegetables, but remained below the Reserve Bank of India’s (RBI) target of 4 per cent.
The annual rate of inflation for Primary Articles of WPI stood to 2.42 per cent in August as compared to 3.08 per cent in July.
Manufactured products’ inflation moderated to 1.22 per cent in August from 1.58 per cent in July.
Food inflation rate eases
The WPI Food Index, which comprises ‘food articles’ from the primary articles group and ‘food products’ from the manufactured products group, dropped from 195.4 in July 2024 to 193.2 in August 2024.
This decline in the Food Index also led to a decrease in the annual rate of inflation based on the WPI Food Index. The inflation rate eased from 3.55% in July 2024 to 3.26% in August 2024, offering some relief amid fluctuating food prices in recent months.
Inflation in wholesale onion prices accelerated to 65.75 per cent in August 2024, up from 34.12 per cent in August 2023.
Wholesale vegetable prices contracted by 10.01 per cent in August against 48.44 per cent in August 2023. Pulses’ prices increased by 18.57 per cent, higher than the 10.39 per cent figure seen a year ago.
Inflation in wholesale potato prices in August 2024 skyrocketed to 77.96 per cent as compared to a contraction of 24.02 per cent last year.
The fruit inflation stood at 16.69 per cent in the said month against a contraction of 12.88 per cent in August 2023.
Das & Co on inflation
RBI during the August MPC meeting had left its inflation forecast for this fiscal year unchanged at 4.5 per cent even amid caution on food price trajectory that may hurt core inflation and intensifying geopolitical tensions which pose a threat to any comfort on crude prices easing to multi-month lows.
The MPC voted to leave the rates unchanged at 6.5 per cent.
Das said the MPC may look through high food inflation if it is transitory but in an environment of persisting high food inflation, as we are experiencing now, the MPC can not afford to do so.
Households see inflation in India rising by 20 basis points each over the next three months and year, according to the households’ inflation expectations survey released by the RBI last month.
