Wholesale inflation (WPI) has come down to 1.31 percent in August 2024, which is the lowest level in four months. This decline is mainly due to the reduction in the prices of vegetables, food items, and fuel. However, the prices of onion and potatoes have remained high, which has had some impact on the inflation rate.

Continuous fall in inflation

According to government data, the Wholesale Price Index (WPI) based inflation has been on the decline for the second consecutive month. It had reached 3.43 percent in May, while it fell to 2.04 percent in July. It fell further to 1.31 percent in August. Inflation in food items stood at 3.11 percent in August, which was 3.45 percent in July.

reduction in vegetable prices

Vegetable prices have declined by 10.01 percent in August. This has reduced the pressure on wholesale inflation. However, onion and potato inflation remained high at 77.96 percent and 65.75 percent respectively. The rising prices of these commodities are affecting the inflation figures.

State of the manufacturing sector

The manufacturing sector also saw some improvement in August. Inflation in manufactured products stood at 1.22 percent. Inflation in fuel and electricity has also come down, which was 1.72 percent in July and fell to 0.67 percent in August. Barclays said that manufacturing costs have come down due to the fall in energy and metal prices, which has reduced the impact on core consumer price inflation.

future prospects

According to Rahul Agarwal, senior economist at ICRA, Kharif sowing has been good so far, but excess rainfall may delay harvesting. This may result in an impact on yields. However, the sowing of Rabi crops is likely to pick up due to adequate storage in reservoirs.

ICRA estimates that wholesale price index inflation may increase from 1.3 percent in August to 2 percent in September 2024. At the same time, retail inflation stood at 3.65 percent in August, slightly higher than 3.60 percent in July. The Reserve Bank of India (RBI) has kept the policy rate unchanged at 6.5 percent in the August monetary policy review, and it mainly focuses on retail inflation.