India’s annual rate of inflation based on wholesale prices touched a two-year high in August at 3.74 per cent from 3.55 per cent in the month before, said official data released on Wednesday.
After rising for the first time in April following 17 straight months of contraction, the WPI has cumulatively risen by 4.45 per cent in the current fiscal up to August. The rise was 0.23 per cent for the corresponding period in 2015.
Food articles inflation last month increased by 8.23 per cent on year-on-year (YoY) basis. However, on a sequential basis it was lower than July’s 11.82 per cent rise.
Nonetheless, the annual rate of inflation for some commodities remained rather high: Potatoes (66.72 per cent), pulses (34.55 per cent) and fruits (13.91 per cent). But onion prices were down 64.19 percent in August this year, against the like month of the previous year.
Data released by the Commerce and Industry Ministry further showed that the annual inflation for manufactured products and fuels remained modest at 2.42 per cent and 1.62 per cent, respectively.
The sub-category of manufactured food products, which includes sugar and edible oils, registered a rise of 11.35 per cent.
This was mainly caused by a spurt in sugar prices, which rose by 35.36 per cent, edible oils became dearer by 5.56 per cent in August.
Fuel inflation remained subdued last month due to lower petrol and liquefied petroleum gas (LPG) prices. However, diesel prices continued to rise after seeing an uptrend in June after many months of consecutive fall. Prices of high-speed diesel rose by 12.15 per cent.
Earlier, data on the consumer price index released on Monday by the Central Statistics Office (CSO) had showed that the annual retail inflation had eased by 100 basis points to 5.05 per cent in August.
Commenting on the WPI data, industry chamber FICCI’s President Harshavardhan Neotia said: “While the WPI inflation rate has edged up marginally in the month of August 2016 vis-à-vis July numbers, food prices which had been on an uptrend over the last few months indicated moderation with vegetable and fruit prices softening.”
“This is also corroborated in the CPI numbers released earlier this week, which reported a fall in the CPI inflation rate on the back of decline in food prices.”
According to Neotia, healthy monsoon rains have been a boon and with improved sowing for major crops, prices are expected to remain range bound this fiscal.
“The government has been examining the situation closely and should continue the measures to improve supply side management,” Neotia said.
Neotia pointed out that the recently released IIP (Index of Industrial Production) numbers indicated persisting weakness in the industrial sector.
“The volatile trend in IIP 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,” Neotia added.
The IIP data released on Monday showed that factory output dipped to a negative growth of (-)2.4 per cent in July from an expansion of 1.95 per cent in the month before.
Another industry body ASSOCHAM said that rise in WPI is in line with industry’s expectation as it got some upward movements through expected increase in industrial output for the month of August but sluggish industrial performance in July as shown by recently released IIP data.
The industry chamber cautioned on the recent rise in sugar prices and said that policy makers should check and address this increase through supply side responses.
The chamber noted that RBI (Reserve Bank of India) which is being guided by CPI may not be in a position to reduce key interest rates since the fall in retail inflation is not yet sustained and it may rise above 6 per cent in coming months.
“It (CPI) may rise above 6 percent in coming months due to expected fall in money supply because of FCNR deposits maturing in September 2016, incremental effect of 7th pay commission and effect of policy announcements by the central banks of US, Japan, China and EU,” ASSOCHAM said in a statement.
“Therefore, Chamber suggests that Government of India should take steps to address the structural issues of demand and supply within the industry to maintain the inflation within the target range continuously for at least six months.”