Manufactured goods also become expensive.
Inflation in wholesale prices rose to 11.39% in August, remaining in double digits for the fifth straight month. Inflation in manufactured products rose for the fourth consecutive month to 11.4% as the second-order impact of higher fuel prices kicked off.
The pace of growth in prices of fuel and electricity as well as primary commodities accelerated to 26.1% and 6.2%, respectively, in August after declining in July, even though food price inflation declined to 3.43% from 4.46% in July. WPI had increased by 0.41% in August 2020, so the base effect also came into play.
“Within the fuel and power category, LPG, petrol and diesel saw inflation of 48.1%, 61.5% and 50.7% respectively,” said Sunil Kumar Sinha, principal economist, India Ratings and Research. As transmitted to all sectors, they increase the transportation cost as well as the input and labor cost.
Apart from crude, the prices of commodities like edible oils and basic metals have also gone up, where global prices are directly passed on to the users, he said. “Edible oil inflation has been above 35% since March and base metals have been above 20% since April,” said Mr. Sinha.
Core WPI inflation, which excludes fuel and food items, also hit an all-time high of 11.1% in August, continuing the 15-month continuous hard streak, greenlighted ICRA Chief Economist Aditi Nair. Flagged off.
“Despite deflation and a favorable base of primary food articles, WPI inflation registered an astonishing 11.4% growth in August, undercutting some of the welcome easing displayed by CPI inflation in the same month,” he said. .
The overall wholesale inflation had come down to 11.16% in July after hitting a record high of 13.11% in May. On a month-on-month basis, the Wholesale Price Index (WPI) rose 1.04% in August, after a sequential rise of around 0.6% in three months. Wholesale price trends are on divergence with retail inflation which eased slightly to 5.3% in August from 5.6% in July.
CARE Ratings chief economist Madan Sabnavis said wholesale inflation for August was higher than expected, with all three segments – primary, fuel and manufactured goods witnessing higher inflation in August.
“Going forward, there will be some moderation on account of easing of primary prices, which will bring down the rate of inflation. However, keeping in view the base effect, the WPI of double digits will remain for the next few months.
Mr Sinha said, “The firmness in inflation despite weak demand conditions may seem surprising to some, but as manufacturers continue to push rising input costs into their production prices, both bulk manufacturing and core inflation continue to remain high. Inflation is showing,” Mr Sinha said.
“The higher rate of inflation in August 2021 is mainly due to increase in prices of non-food items, mineral oils; crude petroleum and natural gas; Manufactured products such as base metals; food products; Cloth; Chemicals and chemical products etc., unlike last August,” said the Office of the Economic Adviser to the Department for Promotion of Industry and Internal Trade.
Inflation in fuel and electricity at the wholesale level stood at 26.02% in July, from 36.74 per cent in May and 32.83 per cent in June, while inflation in manufactured products rose to 11.2% in July from 10.88 per cent in June.
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