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Inflation | August WPI inflation up at 11.39% on higher manufacturing, fuel costs

Inflation | August WPI inflation up at 11.39% on higher manufacturing, fuel costs

India’s annual wholesale price inflation accelerated to 11.39% in August from 11.16% in July, driven by elevated prices in the fuel and manufacturing, reflecting producers’ pricing power in a recovering economy.

Inflation, as measured by the wholesale price index (WPI), rose after easing for two consecutive months even as retail inflation slipped to a four-month low of 5.3% in August.

“The high rate of inflation in August 2021 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,” the commerce and industry ministry said in a statement on Tuesday.

Food inflation was -1.29% in August while fuel and power inflation was at 26.09%, up from 26.02% in the trailing month, as per data released by the ministry.

Manufactured products inflation rose to 11.39% from 11.20% in July.

In manufactured products, food products (12.59%), textiles (17%), chemicals (12.11%), basic metals (27.51%) drove overall inflation.

“Firming up of inflation despite weak demand conditions may appear somewhat perplexing, but as manufacturers are increasingly passing on the rising input costs to their output prices, both wholesale manufacturing and core inflation is showing sustained high inflation,” said Sunil Kumar Sinha, principal economist at India Ratings and Research.

Core-WPI inflation has displayed an uninterrupted hardening for 15 consecutive months to a fresh all-time high of 11.1% in August.

Aditi Nayar, chief economist at

ICRA

, expects double-digit headline and core-WPI inflation till October and then to halve by the end of the year.

Inflation in pulses rose 9.41% and in onion, it grew 62.78% while that in vegetables was -13.3% and in potato was -39.81%.

“Food inflation has been showing signs of easing,” said Madan Sabnavis, chief economist at Care Ratings. “Satisfactory monsoons, good kharif sowing season, easing of supply-side pressures would soothe the inflation over the coming months to some extent,” he said.

“Going ahead, there would be some moderation due to primary prices easing, leading to lower inflation rates. However, double digit WPI would prevail for the next few months given the base effect,” Sabnavis said.

He attributed it to volatile prices in the international markets for crude oil and upward-bound prices of edible oils and metal products.

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