WPI in August at a 2-yr high of 3.74%

WPI in August at a 2-yr high of 3.74%

Core WPI inflation may inch up further in coming days

WPI in August at a 2-yr high of 3.74%

India’s August wholesale price inflation (WPI) rose to a two-year high of 3.74%, backed by higher prices of pulses and manufactured items, even as vegetable prices ebbed.

WPI for pulses was 34.55% in August, and that of potato was close to 67%. In manufactured items, WPI for sugar rose by over 35% . The increase in WPI comes on the back of an easing consumer price inflation (CPI) in August. The official data showed CPI eased to 5.05% in August, compared with 6.07% in July.

Two indices

The divergence in the WPI and CPI is because of the weightage given to items such as food in the two indices. Food prices form a large part of CPI. The August CPI fell on the back of a decline in food prices.

But, inflation in both the indices is above the inflation target set by the Monetary Policy Framework. The Monetary Policy Framework, signed by the RBI and the government, retained inflation target at 4%, plus-or-minus, two percentage points.

Policy response

India Inc, which apprehended that inflation will spike in the coming months, urged the government to take a concerted policy response.

Assocham said that prices of products like pulses, potato and fibres, which are of national interest, have been rising at an industry level, but a recent concern is sugar, which has begun to rise at a much higher rate, and that which policymakers should address using supply-side responses.

“The government should take steps to address the structural issues of demand and supply within the industry to maintain the inflation within the target range continuously for at least six months,” it said.

However, deflationary trend continued in some items like petrol at (-)8.65% and minerals (-)3.44%. The inflation print for manufactured articles read at 2.42% in August, up from 1.82% in July.

Rating agency Icra further said that core-WPI inflation is expected to inch up further in the coming months and remain in a range of 0.5-2% in the remainder of this fiscal.

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