August WPI inflation shrinks to 5-year low of 3.74%

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  1. parijataka

    parijataka Senior Member Senior Member

    Oct 15, 2011
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    Achche din or what ?

    August WPI inflation shrinks to 5-year low of 3.74%

    NEW DELHI: Wholesale Price Index (WPI) for the month of August shrunk to a five-year low of 3.74% versus 5.19% in July. This is much below an ET Now poll of 4.4%.

    The August WPI inflation is the lowest since October 2009 when it stood at 1.8 per cent. The WPI for June has been revised to 5.6% versus 5.43% earlier.

    The primary articles inflation dipped to 3.89% in August versus 6.78% in July. The manufactured products inflation came in at 3.45% versus 3.67% in July. The food price index dipped substantially to 5.15% versus 8.43% in July. The fuel & power inflation was reported at 4.54% versus 7.40% in July.

    Vegetable prices contracted 4.88 per cent, the third continuous month of decline. Maintaining a downward trend, the onion prices contracted by 44.7 per cent during the month under review.

    However, potato prices were on the rise as inflation in the kitchen essential jumped to 61.61 per cent from 46.41 per cent in July.

    Inflation in the fruits basket eased to 20.31 per cent in August.

    While prices of protein rich items like egg, meat and fish contracted during the month, inflation in milk and pulses inched up to 12.18 per cent and 7.81 per cent, respectively, as compared to July.

    While the news was greeted with cheer, most analysts are of the opinion that the Reserve Bank of India's (RBI) tough stand on inflation will continue, since it is the Consumer Price Index (CPI) that the central bank tracks.

    CPI inflation slowed to 7.8 per cent in August from nearly 8 per cent in the previous month. Consumer food inflation went up 9.42 per cent from 9.36 per cent in the previous month but with the monsoon improving dramatically in September, a further spike is unlikely.

    Declining crude and vegetables prices will provide further relief with a cut in diesel prices on the cards. However, most experts still expect the RBI to hold interest rates when it reviews monetary policy on September 30. Retail inflation is still close to RBI's March 2015 target of 8 per cent.

    "We do not expect RBI to change its stance in the upcoming credit policy announcement later this month and thereby the repo rate is likely to remain unchanged," Care Ratings said in a statement last week. The possibility of a rise in interest rates in the US could also keep pressure on the central bank to maintain status quo.

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