Wholesale prices continue to fall

Context 

For the fifth consecutive month, India’s wholesale prices declined in August, although the rate of drop was lessened from 1.36% to 0.52%, despite a decrease in food and primary component inflation to over 6% from over 7.5% in July.

Wholesale Price Deflationary Trend:

• In August, India’s wholesale prices continued their deflationary trend, which has now lasted five months.
• From 1.36% in July, the pace of drop in wholesale prices decreased to 0.52% in August.

Factors Affecting Deflation:

• The price of fuel and electricity played a major role in the decline in the deflation rate.
• Fuel and power price declines decreased from -12.8% in July to -6% in August.
• Sequential Inflation:
• Despite year-over-year deflation, the Wholesale Price Index (WPI) showed a sequential increase when comparing August to July.
• WPI increased by 0.33% in August, compared to a 2.01% growth in July.

Price Trends in Specific Categories:

• Price Trends in Specific Categories: Inflation in food and primary articles slowed, with primary food inflation falling from over 7.5% in July to around 6% in August.
• Falling prices in specific categories were blamed for the negative inflation rate:
  • Oils derived from minerals
  • Basic metals
  • Chemicals and their byproducts
  • Textiles
  • Food and beverages

Details on Food Inflation: 

• The wholesale food index grew by 5.6%.
• Primary food inflation remained elevated in August, at 10.6%, after reaching a high of 14.3% in July.
• Prices for vegetables increased by 48.4% in August, down from 62.1% in July.
• Cereal inflation fell to a three-month low of 7.25% in August.
• Paddy prices climbed by 9.2%, and pulse prices increased by 10.5%, the fastest rate in at least six months for both goods.
• Prices for onions increased by 31.4% in August, compared to 7.1% in July.
• Milk price inflation fell to a six-month low of 7.8%, but it was still only slightly slower than the 8.15% reported in July.

Future Prospects: 

• Economists expect wholesale prices to recover from the deflationary trend in the next months.
• This shows that inflation may go up as some deflationary causes moderate or reverse.

Conclusion

In summary, these points provide a complete picture of India’s wholesale price trends in August, including factors influencing deflation, particular price moves in several categories, and price change projections for the future.