India’s wholesale inflation in August accelerates to 3.24%

A massive jump in food and fuel prices pushed up India’s wholesale price-indexed (WPI) inflation in August at 3.24% to nearly double that of July, official data showed on Thursday.

According to data released by the Commerce Ministry, the annual rate of WPI inflation in July was at 1.88%, while it was at 1.09% during August 2016.

“The annual rate of inflation, based on monthly WPI, stood at 3.24% (provisional) for the month of August, 2017 (over August, 2016) as compared to 1.88% (provisional) for the previous month and 1.09% during the corresponding month of the previous year,” the Ministry said in the “Index Numbers of Wholesale Price in India” for August.

“Build up inflation rate in the financial year so far was 1.41% compared to a build up rate of 3.25% in the corresponding period of the previous year.”

Wholesale prices had accelerated in July to 1.88% from June’s rise of 0.90% and an increase of 2.26% reported for May.

On a segment-wise basis, expenses on primary articles, which constitute 22.62% of the WPI’s total weightage, edged higher by 2.66% from an increase of 0.46% in July 2017.

However, the rise in WPI prices for primary articles during the month under review was slower on a year-on-year (YoY) basis, as it had risen by 4.78% in August 2016.

The prices of food articles rose by 5.75% from an acceleration of 2.15% during July 2017 and a rise of 4.93% in August 2016.

In terms of food prices, the YoY wholesale inflation rate for onion was higher by 88.46%, whereas for potatoes it plunged by (-)43.82%.

In contrast, overall vegetable prices in August rose by 44.91%, against a fall of (-)7.75% in the same month a year ago.

As per the data, on YoY basis, wheat became cheaper by (-)1.44%, while protein-based food items such as eggs, meat and fish became dearer by 3.93%.

Prices of other major group under the WPI — manufactured products — which comprise nearly 64.23% of the index, rose by 2.45%. The sub-category of manufactured food products registered a rise of 1.84%.

The fuel and power price index’s inflation accelerated by 9.99%.

Product-wise, the price of high-speed diesel rose by 20.30% during August, while that for petrol climbed by 24.55%, and for LPG by 5.33%.

This is the second macro-economic inflation data point that has shown a surge in prices.

On Tuesday, Ministry of Statistics & Programme Implementation’s data on August’s consumer price index (CPI) inflation showed a full one percentage point rise to 3.36% from an increase of 2.36% in July.

The data disclosed that country’s Consumer Food Price Index (CFPI) rose to 1.52% during the month under review when compared to July 2017 due to a rise in the prices of food items like vegetables, cereals, milk-based products, meat and fish.

However, on a year-on-year (YoY) basis, the country’s August retail inflation was lower than the 5.05% CPI rate reported for the corresponding month of last year.

The y-o-y data revealed that among non-food categories, the “fuel and light” segment’s inflation rate accelerated to 4.94% in August.

Commenting on WPI data, Assocham’s Secretary General D.S. Rawat said while spike in vegetable prices is seasonal in nature, a huge jump in petrol by over 24% and diesel by over 20% is “worrisome and would prove to be cascading”.

Rawat observed that prices at the fuel stations are rising even when global crude oil rates have not gone up significantly.

The industry body said it has been demanding that the petrol and diesel be brought under the Goods and Services Tax, as they are under heavy burden of taxation from both the central and state governments.

Leading business chamber Ficci’s President Pankaj Patel said: “The increase in the inflation numbers is largely on account of the jump seen in prices of food articles and fuel items. There has been a significant uptick in inflation in case of fruits and vegetables.”

“There have been such episodes in the past and we need to double up our efforts to boost agri-production as well as improve the distribution and supply chains. The localised impact of uneven distribution of rainfall on agri-production will have to be minimised through measures on the supply side including through better storage infrastructure for agri-commodities.”

Patel added that: “While the spurt in inflation is a matter of concern, we hope that RBI takes a balanced view given the anaemic industrial growth scenario. The need for a further cut in interest rates to stimulate demand and growth in the economy cannot be overemphasised.”

“From the perspective of jobs and fresh employment opportunities, all policy levers at the disposal of government and RBI should be utilised even as further steps are taken to augment agri-production and improve the supply side logistics.” IANS