Wholesale inflation remains in negative for fifth month at -0.52% in August

India's WPI deflation rate eased to -0.52% in August 2023, from -1.36% in July. Fuel and power prices declined from -12.8% to -6%. Food articles inflation moderated to 10.6%, from 14.25% in July. Deflation in manufactured products dropped to -2.4%. RBI signalled tighter policy if food prices drive inflation higher.

India’s wholesale prices remained in deflationary mode for the fifth month in a row in August but the decline in prices eased to -0.52% from -1.36% in July, even as inflation in food and primary articles moderated to about 6% from over 7.5% in the previous month.

The dip in the deflation rate was largely driven by fuel and power prices, whose year-on-year decline more than halved from -12.8% in July to -6% in August.

Deflation in manufactured products dropped fractionally from -2.5% in the previous month to -2.4% in August.

On a month-on-month basis, the Wholesale Price Index (WPI) moved up for the second successive month, rising 0.33% in August compared to 2.01% in July. Sequentially, fuel and power costs actually rose 3% after several months of declines, while manufactured products prices rose for the first time in four months, albeit at a marginal pace of 0.14%.

The Commerce and Industry Ministry attributed the negative rate of inflation “primarily to the fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products”.

While the wholesale food index was up 5.6%, primary food articles inflation remained elevated at 10.6% in August after hitting a decade-high of 14.25% in July, with vegetable prices rising 48.4% compared to 62.1% in July.

Inflation in cereals eased to a three-month low of 7.25% in August, but paddy prices surged 9.2% and pulses by 10.5%, the highest pace in at least six months for both food items. Onion prices shot up 31.4% in August, compared to 7.1% in July. Milk inflation eased to a six-month low of 7.8% but was only marginally lower than the 8.15% recorded in July.