India’s Aug WPI up riding on high primary, fuel prices

New Delhi, Sep 14 (IANS) High prices of primary and manufactured goods'prices accelerated India's August wholesale inflation, official data showed on Monday.

Even though food and fuel prices' slipped, they remained on elevated levels.

On sequential level, India's annual rate of inflation based on wholesale prices rose to 0.16 per cent in August from (-) 0.58 per cent in July.

On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry had risen to 1.17 per cent during the corresponding period of the previous year.

“The annual rate of inflation, based on monthly WPI, stood at (0.16 per cent)(Provisional) for the month of August 2020 (over August 2019) as compared to 1.17 per cent during the corresponding month of the previous year,” the ministry said in its review of ‘Index Numbers of Wholesale Price in India' for August.

In the notes to WPI August, the ministry said: “The WPI for August 2020 have been compiled at a weighted response rate of 76 per cent, while the final figure for June 2020 is based on the weighted response rate of 88 per cent.”

On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, increased 1.60 per cent from 0.63 per cent in July 2020.

Nevertheless, the prices of food items remained at elevated levels but declined marginally to 4.07 per cent from a rise of 4.32 per cent reported for July.

The expenses on manufactured products category, which constitute over 64 per cent of the WPI's total weightage, rose to 1.27 per cent from 0.51 per cent in July.

Furthermore, the prices of fuel and power sub-category remained in deflation, easing to (-) 9.68 per cent from (-) 9.84 per cent.

“Whole sale inflation in the month of August came in at 0.16 per cent. Though it is still benign, it is inching up since June and after remaining in deflationary mode for four consecutive months, it finally entered the inflationary mode in the month of August,” said Sunil Kumar Sinha, Principal Economist, India Ratings and Research.

“The key drivers of whole sale inflation for the month of August 2020 were food articles (pulses, vegetables, chicken, meat, tea etc.), manufactured food products (edible oil, milk products, bakery products, processed condiments etc.) and jewellery and related articles,” Sinha added.

According to ICRA Principal Economist Aditi Nayar: “The WPI surprised with a turnaround to a YoY inflation of 0.2 per cent in August 2020 from the disinflation of 0.6 per cent in July 2020, with the sequential hardening driven by core items and commodities, even as food inflation cooled marginally, offering a modicum of relief.

“The turnaround of the WPI into a YoY inflation in August 2020, however marginal, would only strengthen the case for a pause from the MPC in its upcoming policy review.”

In addition, Nayar said that looking ahead, the WPI may move in and out of disinflation in the next few months, partly driven by base effects as well as volatility in commodity and food prices.

“We expect the WPI to record an average disinflation of 0.5 per cent for FY221,” she said.



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