The wholesale price index- (WPI-) based inflation rate for August slowed down for the third consecutive month to an 11-month low of 12.41 percent. This happened because the pricing pressure from manufactured and fuel items eased despite an increase in food inflation.

As per the Data by the industry department, food inflation accelerated to 12.37 percent in August, as prices of wheat, vegetables, fruits, and protein-rich items shot up, compared to their level a year ago. Inflation for fuel (33.67 percent) and manufactured (7.51 percent) items decelerated. Benefitting from the softening in key commodity prices amid global slowdown concerns, the core WPI inflation dipped to a 17-month low of 7.9 percent in August.

However, this is the 17th consecutive month since April 2021 that the factory-gate inflation has remained in double-digits, primarily driven by rising energy and food prices.

WPI inflation for LPG, petrol, and diesel decelerated to 19.75 percent, 38.68 percent, and 60.15 percent, respectively, as global crude oil prices fell below the USD 100-mark in August for the first time since April.

Economic Times quoted chief economist of CARE Ratings, Rajani Sinha, “While easing wholesale inflation is a positive development, it remains to be seen if firms pass on the benefit to consumers. If not, bringing retail inflation within the target range could take even longer. If the easing of global commodity prices sustains, we could expect wholesale inflation to ease to a single digit by October. We expect WPI inflation to fall below CPI inflation by the end of this fiscal year."

Though the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) is tasked with containing retail inflation and not wholesale price inflation, the latter seeps into the former.

Economists expect RBI to increase policy rates in the Monetary Policy Committee meeting later this month. Recently, released data showed that CPI-based inflation reversed its three-month downward trend in August, rising to 7 percent driven by a surge in food prices.

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