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New Delhi: India’s wholesale price index-based inflation eased to a four-month low of 1.31 per cent in August due to falling costs of crude oil, steel and cement, even as prices of food staples like potatoes and onions rose sharply in the same month. India’s wholesale inflation in August was lower than the 1.85 per cent increase anticipated by economists in a Reuters poll and down from 2.04 per cent, according to government data released on Tuesday.
The Reserve Bank of India (RBI), which largely monitors headline retail inflation numbers to decide its monetary policy, is widely expected to hold on to its benchmark repo rate at its policy review from October 7-9. The data released by the government on Tuesday showed that while wholesale inflation had eased in August, the prices of potatoes, onions and fruits rose between 16 per cent and 78 per cent from a year earlier due to heavy rains in parts of the country.
Overall, food prices rose 3.26 per cent year-on-year, compared to a 3.55 per cent increase in July. Cereal prices rose 8.44 per cent over the last year, compared to an 8.96 per cent increase in July. However, Rahul Agrawal, an economist at ICRA ratings agency said that the heavy rainfall in September could delay the plantation of the next crop and put pressure on headline inflation next month.
Last week, government data showed that India’s retail inflation remained below the RBI’s target of 4 per cent for the second consecutive month, but vegetable prices continued to soar, dampening hopes of a dovish stance in the next monetary policy meeting. Annual retail inflation was at 3.65 per cent in August, higher than the revised 3.60 per cent in July and economists’ forecast of 3.5 per cent.
India’s manufacturing companies gain
Global benchmark Brent crude prices have fallen to below $75 a barrel from over $92 a barrel in April, helping major importers like India. Additionally, vegetable prices in India fell 10.01 per cent on-year from an 8.93 per cent drop in July as the supplies improved in the markets.
India’s manufacturing companies have gained after a fall in global commodity prices. Manufactured product prices increased 1.22 per cent year-on-year against a 1.58 per cent rise in the previous month. Fuel and power prices fell 0.67 per cent on-year compared with a 1.72 per cent increase in July, data showed.
According to last week’s data, food prices, which contributed to half of the retail inflation, rose 5.66 per cent in August, compared to a 5.42 per cent rise in the previous month. Risks from spiking food inflation remain but the sudden plunge of global oil prices to a near a 3-year low could partly offset them.
(with Reuters inputs)
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