WPI inflation at 5-month high of 0.16 pc in Aug on costlier manufactured items

The wholesale price-based inflation in India rose the most in five months, climbing 0.16 per cent in August as manufactured products turned costlier.

The Wholesale price index-based (WPI) inflation had remained negative for four months -- April (-) 1.57 per cent, May (-) 3.37 per cent, June (-) 1.81 per cent and July (-) 0.58 per cent -- as coronavirus induced lockdown hurt economic activity.

WPI inflation in March was 0.42 per cent.

"The annual rate of inflation, based on monthly WPI, stood at (0.16 per cent) (provisional) for the month of August, 2020 (over August, 2019) as compared to 1.17 per cent during the corresponding month of the previous year," the commerce and industry ministry said in a statement on Monday.

Inflation in food articles during August stood at 3.84 per cent, led by vegetables and pulses at 7.03 per cent and 9.86 per cent, respectively; while in egg, meat and fish it was 6.23 per cent.

The rate of rise in potato prices was high at 82.93 per cent, while in onion it was (-) 34.48 per cent.

Fuel and power inflation fell 9.68 per cent in August, as against 9.84 per cent in the previous month.

Manufactured products, however, witnessed hardening of inflation at 1.27 per cent in August against 0.51 per cent in July.

ICRA Principal economist Aditi Nayar said the turnaround of the WPI into a year-on-year (YoY) inflation in August, however marginal, would only strengthen the case for a pause (in interest rates) from the Reserve Bank’s Monetary Policy Committee in its upcoming policy review.

"The core WPI moved decisively into a YoY inflation in August 2020, after having recorded a disinflation for 12 consecutive months, although the upmove partly reflected the low base. Going forward, we expect core inflation to harden somewhat to an average 1.5 per cent in second half of FY2021," Nayar said.

Looking ahead, the WPI may move in and out of disinflation in the next few months, partly driven by base effects as well as volatility in commodity and food prices. We expect the WPI to record an average disinflation of 0.5 per cent for FY2021, Nayar said.

The Reserve Bank of India (RBI) in its policy review last month kept interest rates unchanged and said it sees an upside risk to inflation. The apex bank projected retention of inflation to moderate in October-March period.