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Higher prices of mostly non-food products pushed producers’ inflation based on Wholesale Price Index (WPI) to 11.39 per cent in August as against 11.16 per cent in July. This is contrary to retail inflation based on Consumer Price Index (CPI) which slipped to a four-month low of 5.3 per cent in August.
However, upward movement in WPI and downward movement in CPI are unlikely to make any impact on policy rate revision process by the Monetary Policy Committee (MPC). The Committee will meet next month and is likely to maintain a status quo on the policy rates and accommodative stance.
“The high rate of inflation in August is primarily due to rise in prices of non-food articles, mineral oils, crude petroleum & natural gas, manufactured products like basic metals, food products, textiles, chemicals and chemical products etc as compared the corresponding month of the previous year,” a statement from the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT) said on Tuesday.
All the three major groups recorded upward movement, with WPI inflation for primary articles, fuel & power and manufactured products at 6.2 per cent, 26.09 per cent and 11.39 per cent respectively.
Expert take
Aditi Nayar, Chief Economist with ICRA said that the uptick in the WPI inflation in August was led by primary non-food articles, minerals and core items, driven by elevated commodity prices as well as a surge in prices of oilseeds. “The 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,” Nayar added.
“The core-WPI inflation has displayed an uninterrupted hardening for 15 consecutive months to a fresh-all time high of 11.1 per cent in August, belying our anticipation that the July print would prove to be the peak. After two soft MoM prints of 0.3 per cent each in June and July, the sequential momentum for core items hardened to 0.7 per cent in August, led by heavyweights such as metals, vehicles, chemicals and electrical equipment,” she said.
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