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High fuel prices push up August WPI inflation to 11.39%

September 14, 2021 02:47 PM

Wholesale price index
WPI inflation rose marginally to 11.39 per cent in August from 11.16 per cent in July as prices of non-food articles such as oil seeds, fuel, minerals remained elevated.

Wholesale price index (WPI) inflation rose marginally to 11.39 per cent in August from 11.16 per cent in July as prices of non-food articles such as oil seeds, fuel, minerals remained elevated.

The wholesale price index (WPI) inflation remained in double digits throughout the current financial year. The high inflation rate in August was largely due to low base effect as inflation in August 2020 was of 0.41 per cent.

“The high rate of inflation in August 2021 is primarily due to rise in prices of non-food articles, mineral oils, crude petroleum and natural gas, manufactured products like basic metals, food products, textiles, chemicals and chemical products as compared the corresponding month of the previous year,” the Ministry of Commerce and Industry said in a statement.

Also Read : WPI inflation eases to 11.16% in July on lower rise in fuel, power prices

WPI inflation rose marginally even as retail inflation measured by Consumer Price Index (CPI) slipped to a four-month low of 5.30 per cent as prices of manufactured products spiked.

There will always be a disconnect between WPI and CPI because of nature of the price indices and as the weightage in CPI is more towards food and WPI towards manufactured products, said Devendra Pant, chief economist at India Ratings & Research. As food prices are declining, retail inflation has fallen whereas wholesale inflation has gone up due to higher prices of manufactured goods, Pant said.

Inflation in food articles eased for the fourth consecutive month, recording (-) 1.29 per cent in August, from zero per cent in July, even as price of pulses spiked. Inflation in pulses was 9.41 per cent in August as compared to 8.34 per cent in July.

“In spite of the primary food articles slipping into disinflation and a favourable base, the WPI inflation posted a surprise uptick to 11.4% in August 2021, taking some sheen off the welcome easing displayed by the CPI inflation in the same month,” said Aditi Nayar , chief economist at ICRA Ltd.

The base effect is likely to drive primary food articles deeper into disinflation until November 2021, before a year-on-year inflation re-emerges from December 2021 onwards, Nayar said. “With the late surge in rains in September, a delay in the kharif harvest may be followed by late Rabi sowing, exacerbated by the year-on-year decline in reservoir levels,” she said.

Inflation in manufactured products stood at 11.39 per cent in August, against 11.20 per cent in July. In non-food articles, inflation increased to 28.76 per cent in August from 22.94 in July as prices of oil seeds surged. Inflation in crude petroleum and natural gas was 40.03 per cent in August.

The inflation for crude petroleum and natural gas, and fuel and power were largely stable in August 2021 at the previous month’s level, whereas both the primary and manufactured food items recorded a softening of inflationary pressures, in line with the moderation in the retail food inflation, said Nayar.

Data released on Monday showed that retail inflation softened to a four-month low of 5.3 per cent in August, from 5.59 per cent in the previous month, led by subdued prices of food articles.

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