Wholesale inflation dips for fifth month to 0.5% in August
Wholesale inflation declined for the fifth consecutive month in August to 0.52% from 1.4% in July providing further comfort to the Reserve Bank of India to hold rates ahead of the RBI's Monetary Policy Committee in early October, experts said.
«With fall in commodity prices driving deflation in core WPI on YoY basis (which implies lower input costs for producers), currently there is limited pressure on consumer prices, resulting in broadly stable CPI core inflation. This is likely to comfort the RBI,» said Rahul Bajoria, head of EM Asia (ex-China) economics, Barclays.
RBI last raised policy rates to 6.5% in February and has not instituted a rate hike since.
The RBI's MPC is scheduled to meet from October 4-6, 2023.
Earlier this week, retail inflation eased more than expected as decline in food prices brought down consumer inflation to 6.8% for August. Experts indicate that further fall in tomato prices along with the ₹200 price cut in LPG cylinders is likely to bring inflation around 5.5% in September.
However, they say wholesale prices could rise later in September as the base effects wane and crude oil prices that have been rising since July weigh on WPI index.
«The degree of WPI deflation has been coming down and is likely to turn into inflation in the September print,» said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Crude prices rose 7.5% sequentially in August easing the decline in WPI to 6% in August from 12.8% in the previous month, according to data released on Thursday.
Sequentially, 3% rise in fuel and power index drove the wholesale price index up 0.33% in August from the previous month.
«We could expect WPI inflation to enter the positive territory next month onwards.
