India's Wholesale Inflation Slows to 1.31% In August

Food price inflation decreased to 3.11 per cent in August, down from 3.45 per cent the previous month, according to data released by the Ministry of Commerce and Industry on Tuesday

India's wholesale price index (WPI)-based inflation eased to a four-month low of 1.31 per cent in August, down from 2.04 per cent in July. This decline was primarily attributed to reduced prices for manufactured goods and food items.

Food price inflation decreased to 3.11 per cent in August, down from 3.45 per cent the previous month, according to data released by the Ministry of Commerce and Industry on Tuesday. The report also indicated a slowdown in the price increases of other major categories, including manufactured products. Additionally, the prices of fuel and power contracted during the same period.

Within the category of food articles, the prices of cereals (up by 8.44 per cent), paddy (up by 9.12 per cent), and pulses (up by 18.57 per cent) experienced a slowdown in their rate of increase. Although onion prices saw a slight moderation to 65.75 per cent, they remained in double digits. Conversely, the prices of potatoes (up by 77.96 per cent) and fruits (up by 16.7 per cent) accelerated during the month.

Inflation for manufactured products, which constitute 64.2 per cent of the index, also decreased, falling to 1.22 per cent from 1.58 per cent in July. This decline was driven by a slowdown in the price increases for several categories, including manufactured food products (3.61 per cent), beverages (1.9 per cent), textiles (1.79 per cent), wood products (3.17 per cent), and pharmaceuticals (1.97 per cent), among others.

Factory gate prices for fuel and power contracted by 0.67 per cent in August, primarily due to declines in the prices of high-speed diesel (-3.03 per cent) and petrol (-4.23 per cent). However, the cost of cooking gas increased significantly, rising by 14.4 per cent during the same period.

This moderation in factory gate inflation comes shortly after a slight uptick in retail inflation, which edged up to 3.65 per cent in August from 3.6 per cent in July. Despite this increase, retail inflation remains below the Reserve Bank of India’s (RBI) medium-term target of 4 per cent for the second time in nearly five years. As the RBI monitors retail inflation to guide its monetary policy, the recent reduction in wholesale price index (WPI) inflation could contribute to maintaining lower retail inflation in the future, though this effect may be delayed.