WPI inflation rises sharply to four-month high 3.24 per cent in August

Wholesale inflation rose sharply to a four-month high of 3.24 percent in August as prices of food articles, led by onions and vegetables, soared. The last such high level of inflation was witnessed in April when the rate of price rise was 3.85 per cent.

Inflation based on the wholesale price index (WPI) was 1.88 percent in July 2017 and 1.09 percent in August 2016. The last such high level of inflation was witnessed in April when the rate of price rise was 3.85 per cent.

The government data released on Thursday showed that the prices of food articles went up by 5.75 % in August on a yearly basis, as against 2.15 % in July. Vegetable prices shot up by 44.91 % in August, as against 21.95 % in July.

Onion prices witnessed a sharp surge at 88.46 % in August, as against a contraction of 9.50 % in the previous month. Inflation in manufactured products witnessed a slight increase at 2.45 % in August, against 2.18 % in July.

Fuel and power

In fuel and power segment, inflation saw a sharp surge to a near double digit at 9.99 %, against 4.37 % in July. Fuel inflation shot up as petrol and diesel prices continued to remain high relentlessly on global crude oil rates, while power tariffs shot through the roof on lower domestic production.

Apart from vegetables, s prices of pulses, fruits (7.35 %), egg, meat and fish (3.93 %), cereals (0.21 %) and paddy (2.70 %) also was on the increase.

However, potato continued to see deflation at 43.82 % and pulses (-)30.16 %. The final print of June WPI inflation remained unchanged from provisional estimate of 0.90 %.

Data released earlier this week showed retail inflation rose to a five-month high of 3.36 % in August due to costlier vegetables and fruits. Also industrial production grew by just 1.2 % in July from 4.5 % a year ago, bearing the brunt of a dismal show of the manufacturing sector.
Last month, the Reserve Bank cut policy repo rate by 0.25 % to 6 % citing reduction in inflation risk. The rate cut was the first in 10 months and brought policy rates to near 7-year low.

The RBI has said that it will endeavour to keep retail inflation close to 4 % but in the near term, there might be some uptick on account of pay commission payouts and price adjustments post GST rollout from July 1.