NON-FOOD ARTICLES FIRE UP WHOLESALE INFLATION TO 11.4%
August inflation snaps 2-month easing trend; in double digits for 5th month
Wholesale inflation rose to 11.39 per cent in August from 11.16 per cent in July, despite a fall in prices of food items as inflation in manufactured items and non-food articles such as oilseeds and minerals remained elevated. The Wholesale Price Index (WPI) inflation has been in double digits in each of the first five months of the current financial year.
Unlike its consumer price counterpart, wholesale inflation rose to 11.39 per cent in August, from 11.16 per cent in July, despite a fall in prices of food items as inflation in manufactured items and non-food articles such as oilseeds and minerals remained elevated.
The Wholesale Price Index (WPI) inflation has been in double digits in each of the first five months of the current financial year. The high rate in August, which snapped the two-month easing trend, was partially due to low base effect as inflation in August 2020 was at 0.41 per cent.
On Monday, data showed that retail inflation — measured by the Consumer Price Index (CPI) — slipped to a fourmonth low of 5.30 per cent.
There is always a disconnect between WPI and CPI because of the nature of the price indices and higher weighting of food items in CPI and that of manufactured items in WPI, said Devendra Pant, chief economist at India Ratings & Research. As the rate of price rise in food items declined, retail inflation fell in August, whereas wholesale inflation went up due to higher prices of manufactured goods, Pant said.
IDFC First Bank Economics Research said in a note that cost-push pressures are gradually seeping into manufactured goods prices. This is likely to keep core CPI inflation elevated despite the presence of excess capacity.
Food articles, in fact, saw deflation of 1.29 per cent in August, from zero per cent in July, even as the price of pulses spiked. Inflation in pulses was 9.41 per cent in August compared to 8.34 per cent in July. “The WPI inflation posted a surprise uptick, taking some sheen off the welcome easing displayed by the CPI inflation in the same month,” said Aditi Nayar, chief economist at ICRA.
The base effect is likely to drive primary food articles deeper into deflation until November, before a year-on-year (YOY) inflation re-emerges from December onwards, Nayar said. “With the late surge in rains in September, a delay in the kharif harvest may be followed by late rabi sowing, exacerbated by the YOY decline in reservoir levels,” she said.
Inflation in manufactured products was at 11.39 per cent in August, against 11.20 per cent in July. In non-food articles, inflation increased to 28.76 per cent, from 22.94 in July as prices of oilseeds surged. Inflation in crude petroleum and natural gas was 40.03 per cent in August.
Inflation for crude petroleum and natural gas, and fuel and power was largely stable in August at the previous month’s level, whereas both the primary and manufactured food items recorded a softening of inflationary pressures, in line with the moderation in the retail food inflation, said Nayar.