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Wholesale inflation cools in August as food prices soften

, ET Bureau & Agencies|
Updated: Sep 14, 2018, 07.55 PM IST
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August WPI inflation at 4.53% vs 5.09% in July
August WPI inflation at 4.53% vs 5.09% in July
India’s wholesale inflation moderated to 4.53% in August from 5.09% in July on softening of prices of food articles, especially vegetables.

The Wholesale Price Index (WPI) based inflation stood at 5.09 per cent in July and 3.24 per cent in August last year.

Data released by commerce and industry ministry on Friday showed a 4.04% decline inflation in food articles in August compared with a 2.16% fall in July.

Vegetables inflation plummeted further, rising to 20.18% in from a 14.17% fall in July.

“In the immediate term, continuing slack in food prices would weigh against the surge in crude oil and retail fuels in the current month,” said Aditi Nayar, principal economist at ICRA.

Deflationary trend in food articles offset the double-digit inflation in 'fuel and power' basket in August. Inflation in this category was 17.73 per cent as prices of domestic fuel increased during the month, in line with high global crude oil rates.

While inflation in liquefied petroleum gas (LPG) was 46.08 per cent, in diesel and petrol it was 19.90 per cent and 16.30 per cent, respectively, during August.

Among food articles, potato inflation continued to rule high at 71.89 per cent in August, while onion and fruits witnessed deflation of 26.80 per cent and 16.40 per cent, respectively.

Deflation continued in pulses at 14.23 per cent in August.

The 4.53 per cent inflation is the lowest in four months, and a lower inflation than this level was last seen in April at 3.62 per cent.

As per the data, the WPI inflation for June was revised downwards to 5.68 per cent from the provisional estimate of 5.77 per cent.

Brent crude oil price is hovering at around USD 79 a barrel. This, along with a depreciating rupee has increased the oil import bill, thereby making petrol and diesel costlier.

Petrol price Thursday climbed to an all-time high of Rs 81 per litre in Delhi, while in Mumbai it inched up to Rs 88.39. A litre of diesel in the national capital was priced at Rs 73.08 and Rs 77.58 in Mumbai.

Data released earlier this week showed retail inflation eased to a 10-month low of 3.69 per cent in August. RBI mainly takes into account retail inflation data while formulating monetary policy.

Core inflation hardened to 5% in August from 4.8% in July.

Rising core inflation could prompt majority of the members of the monetary policy committee to vote for a rate hike in the October policy meeting, according to Nayar.

In its third monetary policy review for the fiscal, the Reserve Bank last month hiked interest rate by 0.25 per cent to 6.5 per cent on inflationary concerns.

For July-September, RBI pegged CPI-based retail inflation at 4.2 per cent, which it saw firming up to 4.8 per cent in the second half of the current fiscal.
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