WPI Food Inflation To Inch Up In Aug, Says Icra

As the prices of the majority of food items have dipped on a sequential basis in August 2024 so far and the global commodity prices have moderated over the past few weeks, the Wholesale Price Index (WPI) inflation is expected to remain stable in August, as per a report by Icra. The rating agency expects the WPI inflation to be at 2 per cent in August 2024, unchanged from the rate in July 2024. However, the year-on-year (YoY) WPI food inflation is likely to inch up in August.

As per Icra, the price of the Indian basket of crude oil fell by around 7.6 per cent on a month-on-month basis from 1 to 12 August 2024, which is a positive sign as far as the WPI inflation print for the month is concerned.

Due to rising recessionary fears in the United States of America, global commodity prices have taken a dent since mid-July 2024. The Bloomberg commodity price index dipped to a three-year low after declining by 4.1 per cent on a sequential basis in August 2024 (from 1 to 12 August). The index fell by 3.1 per cent in July 2024. The year-on-year contraction in the index upto 12 August was 9.7 per cent, as per the report by Icra.

In addition, the falling prices of crude oil are likely to exert downward pressure on the WPI inflation in August 2024, the report stated. As the US Dollar/ Indian Rupee pair averaged at 83.88/USD from 1 to 12 August as compared with 83.59/USD in July 2024, an upward pressure on the landed cost of imports in August 2024 is expected, according to the Icra report.

However, Icra expects the WPI-food inflation to be higher in August 2024, amid the unfavourable base in the primary food articles segment (15.1 per cent in July 2023 and 11.4 per cent in August 2023).

The average wholesale prices of 16 of the 22 commodities in August 2024 (upto 12 August) softened on MoM basis, as per the data by the Department of Consumer Affairs. On a YoY basis, the prices of all commodities except palm oil and potato eased in their inflation rates upto 12 August 2024, relative to July 2024. Due to the healthy progression of Kharif sowing, the prices of rice, edible oils and pulses came down in August 2024 as compared to July 2024.