India’s August wholesale inflation cools to 1.31% as global oil prices fall

INDIA’S wholesale price index based inflation eased to a four month low of 1.31 per cent in August, helped by falling costs of crude oil, steel and cement, although prices of food staples like potatoes and onions rose sharply.

August wholesale inflation was lower than the 1.85 per cent increase anticipated by economists in a Reuters poll and down from 2.04 per cent in July, according to government data released on Tuesday (Sep 17).

The government is under pressure to contain food prices and placate farmers after Prime Minister Narendra Modi’s Bharatiya Janata Party suffered losses in rural constituencies in general elections.

The country’s central bank, which largely monitors headline retail inflation numbers to decide its monetary policy, is widely expected to hold on to its benchmark repo rate at its policy review from Oct 7 to Oct 9.

Tuesday’s data showed that though headline wholesale inflation cooled, prices of potato, onions and fruits in August rose between 16 per cent and 78 per cent from a year earlier, hit by heavy rains in some parts of the country.

Overall, food prices rose 3.26 per cent year on year, compared to a 3.55 per cent increase in the previous month. Cereal prices rose 8.44 per cent over last year, compared to an 8.96 per cent increase in July.

Rahul Agrawal, economist at ICRA ratings agency said that the heavy rainfall in September could delay plantation of the next crop and put pressure on headline inflation next month.

ICRA expects WPI inflation to rise to 2 per cent in September.

Vegetable prices, however, fell 10.01 per cent on-year from a 8.93 per cent drop in July as the supplies improved in the markets.

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India’s manufacturing companies have gained after a fall in global commodity prices.

Manufactured product prices increased 1.22 per cent year on year against a 1.58 per cent rise in the previous month. Fuel and power prices fell 0.67 per cent on-year compared with a 1.72 per cent increase in July, data showed.

Global benchmark Brent crude prices have fallen to below US$75 a barrel from over US$92 a barrel in April, helping major importers like India.

Last week, data showed India’s retail inflation remained below the central bank’s target of 4 per cent for the second consecutive month, but high food prices have dampened the hopes of a dovish stance in the next monetary policy meeting. REUTERS