India’s wholesale prices fell for a tenth straight month in August, government data showed yesterday, pulled down by falling fuel costs and hiking prospects of an interest rate cut.
The Wholesale Price Index (WPI), an inflation indicator that measures the biggest basket of goods, fell 4.95% last month compared with a year earlier, after slipping 4.05% in July, the commerce ministry said.
Economists surveyed by Bloomberg had estimated that the WPI would slump 4.4%.
“Wholesale price inflation has now been in negative territory for ten consecutive months, and is at its lowest since monthly prices started being tracked in 2005,” Capital Economics analyst Shilan Shah said.
“This strengthens our view that interest rates will be cut at the RBI’s policy meeting later this month.”
However, some commodities of mass consumption continued to upset household budgets and notably among them was onion, whose prices were higher by as much as 65% over the same period last year. Pulses were dearer by 36%.
Other protein-rich food items such as milk, eggs, meat and fish recorded modest price increases. On a year-on-year (YoY) basis milk was costly by 2.08%, while eggs, meat and fish prices rose by 3.30%.
At the same time potatoes and vegetables were cheaper respectively by 52% and 21%. Even the prices of cereals and rice dwindled. Cereals depreciated by 1.65% and rice by 3.48%.
Overall, food prices declined by 1.13% on a YoY basis.
Even under the manufactured products category, prices of commodities pertaining to food fell - especially sugar that was lower by 19% year-on-year.
Petrol was cheaper by 13.26% and diesel by 24.54%. Cooking gas receded by 5.32%.
The figures come hours before data on consumer prices is due to be released that the Reserve Bank of India (RBI) uses to track interest rates. Retail inflation is forecast to ease, Bloomberg has predicted.
Pressure has been growing for a cut in interest rates after RBI Governor Raghuram Rajan kept them on hold last month after three earlier cuts this year.
India’s economy slowed to 7% in the first quarter of the current financial year, matching China and outpacing most major economies, but down from 7.5% in the previous quarter.
Prime Minister Narendra Modi’s business-friendly government is keen for a further cut as it seeks to quicken the pace of growth in Asia’s third-largest economy.
But Rajan is concerned about a renewed rise in inflation in a country where food and other price hikes cause huge hardship for tens of millions of poor.
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