Wholesale price inflation in negative zone for 5th month in a row

Primary articles inflation stood at 6.34% in August, despite a high base of 14.74% recorded in August 2022.

The annual wholesale price inflation remained in the negative territory for the fifth month in a row in August helped by decline in the prices of manufactured products, fuel and power, even though food items became costlier, the government data showed.  

The Wholesale Price Index (WPI)-based inflation stood at (-) 0.52 per cent in August. This means the general price level in the wholesale market in August was 0.52 per cent cheaper when compared with the same month last year.

In July the WPI inflation stood at (-) 1.36 per cent. While the wholesale prices remained in deflationary zone for the fifth straight month, the decline in prices in August was the slowest in 5 months. The key reason for deflation in the recent month is favourable base effect. In August 2022, the WPI inflation stood at 12.48 per cent.

“With the support of high base fading, some uptick in WPI inflation could be seen in the second half. We could expect WPI inflation to enter the positive territory next month onwards,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

Additionally, rise in global crude oil prices and deficient rainfall domestically pose an upside threat. Nevertheless, for the full fiscal year (FY24), we expect WPI inflation to average in the range of 1-2 per cent, she added.

Manufactured products, which has 64.23 per cent weight in the WPI index, became cheaper by 2.37 per cent year-on-year during the month under review. Fuel and power became cheaper by 6.03 per cent in August 2023 when compared with the same month last year, as per data released by the Ministry of Commerce and Industry.

Inflation in primary articles remained the key concern. Primary articles inflation stood at 6.34 per cent in August, despite a high base of 14.74 per cent recorded in August 2022.

Despite some easing on a month-on-month basis, food inflation remained in the double digit. The WPI based food inflation stood at 10.60 per cent in August as compared to 14.25 per cent recorded in the previous month.

Food inflation was led by a 48.39 per cent year-on-year surge in the prices of vegetables. Price of onion in the wholesale market in August was 31.42 per cent higher when compared with the same month last year. Pulses were costlier by 10.45 per cent, paddy was costlier by 9.18 per cent year-on-year during the month under review.

High food prices have kept retail inflation elevated in recent months. The Consumer Price Index (CPI) based retail inflation stood at 6.83 per cent in August, as per data released by the National Statistical Office (NSO) earlier this week. Retail food inflation stood at 9.94 per cent in August. Though there was month-on-month decline, retail inflation remained above the comfort zone of the Reserve Bank of India (RBI).