Wholesale Inflation Hits Four-Month Low At 1.3% In August

India's wholesale price inflation dropped to a four-month low of 1.31 per cent in August, down from 2.04 per cent in July, as price rises in food and manufactured goods moderated, and fuel and power costs slipped into mild deflation. According to government data released on 17 September 2024, fuel and power prices recorded a 0.7 per cent decline compared to a 1.7 per cent rise in July.

Food inflation eased slightly to 3.3 per cent in August from 3.6 per cent in July, largely driven by a year-on-year decline in vegetable and egg, meat, and fish prices. Vegetables saw a 10 per cent drop, while egg, meat, and fish prices fell by 0.7 per cent. Base effects played a significant role in this moderation, as vegetable prices were up by 48.4 per cent in August last year.

Despite the overall moderation, some food items experienced sharp price increases. Cereals inflation remained firm at 8.44 per cent, with paddy prices rising by 9.1 per cent and wheat inflation accelerating to 7.3 per cent, up from 7 per cent in July. Pulses inflation surged to 18.6 per cent, while potato prices skyrocketed with a 78 per cent inflation rate in August.

Onions continued to witness high inflation, with prices up 65.75 per cent, though this was lower than July's 88.8 per cent rise. Fruit prices also increased by 16.7 per cent, while milk inflation eased to 3.5 per cent from 8.5 per cent a year ago. The Food Index fell 1.13 per cent from July, contrasting the six-month high of 2.7 per cent sequential growth recorded in the previous month.

Economists anticipate some reversal in food inflation gains for September due to base effects from last year, which could push wholesale inflation to around 2 per cent from August's 1.3 per cent, according to Rahul Agrawal, senior economist at ICRA.

Manufactured product prices, which had been on a three-month rising streak, saw inflation ease to 1.22 per cent in August from 1.6 per cent in July. On a month-on-month basis, prices were down 0.07 per cent. Fuel and power prices rose slightly by 0.14 per cent month-on-month, but were still 0.7 per cent below August 2023 levels, marking a reversal of the gradual upticks observed over the past three months.