WPI inflation rises for first time since March; August WPI rises this much
Wholesale Price Index (WPI) for August 2020 rose to 0.16% after being in a negative territory for four months straight since March.
by FE Online
WPI inflation is likely to increase in the coming months as the prices of manufactured products soar.
Wholesale Price Index (WPI) for August 2020 rose to 0.16% after being in a negative territory for four months straight since March. The same can be attributed to a jump in prices of food items and manufactured goods which led to the rise in August. In the last four months, WPI was in negative, at -0.58% in July, -1.81% in June, while for the month of May and April it was -3.37% and -1.57%, respectively. “The annual rate of inflation, based on monthly WPI, stood at 0.16% (provisional) for the month of August 2020, as compared to 1.17% during the corresponding month of the previous year,” the Ministry of Commerce & Industry said in its statement on Monday.
Should headline inflation be a concern for policy makers?
WPI inflation is likely to increase in the coming months as the prices of manufactured products increase. Further, while inflation of manufactured goods would increase as companies get back their pricing power, primary articles inflation is expected to remain depressed with a good harvest. However, “Headline inflation will remain low nonetheless and will not be a concern for policy makers,” a CARE Ratings report said. Primary articles, which hold 22.62% weightage in WPI inflation, rose by 1.81%, to 146.3 (provisional) in August 2020 from 143.7 (provisional) for the month of July 2020. Prices of minerals minerals, crude petroleum and natural gas, non-food articles and food articles also increased as compared to July 2020.
“The uptick was limited owing to the continued deflation in the fuel component, which has continued for the 6th consecutive month. Wholesale inflation in the food articles have moderated to 3.8% from the
previous month. The final WPI inflation remained at -1.8% for June 2020,” the report said.
The WPI food index which comprises food articles from primary articles group and food product from manufactured products group have also increased from 152.0 in July to 153.3 in August. The annual rate of inflation based on WPI Food Index fell from 4.32% in July to 4.07% in August.