Food, fuel drive WPI-based inflation to 4-month high

NEW DELHI: Higher prices of food and fuel products drove inflation based on wholesale price index ( WPI) to a four-month high of 3.24% in August even as experts said the rise is in expected lines.

WPI-based inflation had stood at 1.88% in July. Wholesale food inflation was 4.41% last month compared with 2.12% rise in wholesale prices in July, while fuels inflation shot up to 9.99% in August against 4.37% in the previous month, according to data released by the commerce and industry ministry on Thursday.

The trend is in line with the retail inflation that rose to a five month high of 3.36% in August due to costlier vegetables and fruits, data released earlier this week showed. Food inflation was driven by rising price trends of onion at 88.46%, vegetables at 44.91%, fruits at 7.35% and milk at 3.94%. Prices of potato declined 43.8% in August.






Primary articles inflation rose 2.66% last month from 0.46% in July while manufactured product index grew 2.45%. Rising inflation will mean lesser room for the Reserve Bank of India to cut lending rates to revive anaemic industrial growth that stood at 1.2% in July.

“WPI and CPI inflation have bottomed out with adverse base effect, mean reversion of food prices, and goods and services tax-related adjustment,” said Upasna Bhardwaj, senior economist, Kotak Mahindra Bank. “Along with uptrend in global commodity prices (this is) likely to put upside pressure to the headline inflation,” she said.

The unevenly distributed monsoon could also impact food prices. CARE Ratings expects wholesale inflation to be around 3.5% by the end of the fiscal year, only marginally up from the current levels.

Axis Bank chief economist Saugata Bhattacharya said this is the peak of wholesale inflation because tomato and onion prices are expected to fall. The final print of WPIbased inflation in June, meanwhile, remained unchanged from provisional estimate of 0.9%.