WPI inflation at -4.95% in August, extends the deflationary trend for tenth straight month

Wholesale Price Index (WPI) inflation remaining in deflation zone for the 10th month in a row came at -4.95% (provisional) for the month of August, 2015 (over August, 2014) as compared to -4.05% (provisional) for the previous month and 3.85% during the corresponding month of the previous year, mainly driven by lower fuel prices. WPI inflation has been in the negative zone since November 2014.

The official Wholesale Price Index for ‘All Commodities’ (Base: 2004-05=100) for the month of August, 2015 declined by 0.5 percent to 176.7 (provisional) from 177.5 (provisional) for the previous month. Build up inflation rate in the financial year so far was 0.34% compared to a build up rate of 3.11% in the corresponding period of the previous year.

Primary Articles which has weight of 20.12% in the whole index, rose by 1.7 percent to 251.5 (provisional) from 247.2 (provisional) for the previous month. In the primary articles index, Food Articles’ group rose by 2.6 percent to 262.3 (provisional) from 255.7 (provisional) for the previous month due to higher price of fruits & vegetables and pulses. The index for  ‘Non-Food Articles’ group rose by 0.8 percent to 217.4 (provisional) from 215.6 (provisional) for the previous month. On the other hand, the index for ‘Minerals’ group declined by 4.4 percent to 244.6 (provisional) from 255.9 (provisional) for the previous month.

Fuel & Power, having weight of 14.91% declined by 4.5 percent to 178.7 (provisional) from 187.1 (provisional) for the previous month.

Manufactured products, which has the highest weight 64.97% in the WPI declined by 0.4 percent to 153.1 (provisional) from 153.7 (provisional) for the previous month. In the manufactured products, the index for ‘Food Products’ group declined by 0.2 percent to 171.7 (provisional) from 172.0 (provisional) for the previous month. The index for ‘Rubber & Plastic Products’ group declined by 0.5 percent to 148.7 (provisional) from 149.4 (provisional). The index for ‘Chemicals & Chemical Products’ group declined by 0.1 percent to 151.3 (provisional) from 151.4 (provisional) for the previous month. The index for ‘Basic Metals, Alloys & Metal Products’ group declined by 1.9 percent to 154.1 (provisional) from 157.1 (provisional), the index for ‘Machinery & Machine Tools’ group declined by 0.2 percent to 134.9 (provisional) from 135.2 (provisional) and The index for ‘Transport, Equipment & Parts’ group declined by 0.1 percent to 137.7 (provisional) from 137.8 (provisional) for the previous month.

On the other hand, the index for ‘Beverages, Tobacco & Tobacco Products’ group rose by 0.1 percent to 206.4 (provisional) from 206.1 (provisional). The index for ‘Wood & Wood Products’ group rose by 0.3 percent to 198.5 (provisional) from 197.9 (provisional), the index for ‘Paper & Paper Products’ group rose by 0.7 percent to 154.7 (provisional) from 153.6 (provisional), the index for ‘Leather & Leather Products’ group rose by 0.4 percent to 144.9 (provisional) from 144.3 (provisional) for the previous month and the index for ‘Non-Metallic Mineral Products’ group rose by 0.8 percent to 175.6 (provisional) from 174.2 (provisional) for the previous month.

The numbers are going to put further pressure on the Reserve Bank of India (RBI) to cut interest rate. While, the food inflation remained in negative territory for second month the major pull came on the back of a sharp cooling in fuel costs. However, onion and pulses turned costlier with inflation at 65.29% and 36.40% respectively during August.