Wholesale price inflation rose to a two-year high of 3.74 per cent in August pushed up by expensive pulses and potatoes as well as a sudden spike in prices of manufactured items.

Wholesale price index (WPI) based inflation was 3.55 per cent in July and had contracted by 5.06 per cent in August last year.

Previously, WPI inflation had hit a high at 3.74 per cent in August 2014.

The rise in wholesale inflation in August comes at a time when retail inflation in the month fell to a five-month low of 5.05 per cent and raised expectations that the Reserve Bank of India (RBI) would lower policy rates in its October 4 meeting to counter the cooling factory output that dipped by 2.4 per cent in July.

Data released on by the Commerce Ministry on Wednesday revealed that food inflation eased to 8.23 per cent in August from 11.82 per cent in July. In some reprieve to consumers, WPI inflation in vegetables cooled to 0.17 per cent in August, from 28.05 per cent in July.

But, a sudden rise in manufacturing inflation to 2.42 per cent in August from 1.82 per cent in July contributed partly to the spurt in headline inflation.

Pulses inflation continued to rule high at 34.55 per cent in August though it was marginally lower than July levels while inflation in potatoes rose to 66.72 per cent.

WPI inflation in the category of fuel and power also rose sharply to 1.62 per cent in August from a contraction of one per cent in July.

The WPI inflation for June was also revised upwards to 2.12 per cent, against provisional estimate of 1.62 per cent.

Analysts said WPI inflation could rise in coming months because of a likelihood of rising factory gate prices of manufactured goods fuelled by consumer demand with the pay out from the Seventh Pay Commission and a good monsoon.

“Since the manufactured products have 65 per cent weight in the WPI as compared to food articles, an accentuation of the price increase trend witnessed in case of manufactured products since the beginning of this fiscal will push the WPI inflation further in the coming months despite the softening impact of food inflation,” said Sunil Sinha, Principal Economist, India Ratings.

As the RBI now targets consumer price inflation, industry is hoping for a rate cut.

“The volatile trend in index of industrial production growth is a concern and we need to ensure a firm turnaround in this trend before it becomes more deep rooted. We look forward to an accommodating stance in the monetary policy to be announced next month,” said Harshavardhan Neotia, President, FICCI.

Concerned about rising inflationary trends, the RBI in its monetary policy review last monthmaintained the status quo on key rates.

Related Topics
comment COMMENT NOW