Wholesale price inflation touches -4.95% in August

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New Delhi | Updated: Sep 14, 2015 2:11 PM

Deflationary trend continued for the 10th month in a row with inflation plunging to a historic low of (-)4.95 per cent in August on cheaper fuel and vegetables, putting pressure on RBI to cut interest rate.

Wholesale inflationWPI inflation plunged to a historic low of (-)4.95 per cent in August on cheaper fuel and vegetables, putting pressure on RBI to cut interest rate. (Reuters)

Wholesale price inflation hit a fresh low of -4.95% in August, compared with -4.05% in July, on a further deepening of a broad-based fall in commodity prices, showed the official data released on Monday.

Coming on the back of a record fall in retail inflation to 3.78% in July from 5.4% in the previous month and a slowdown in industrial production to 4.2% in July from 4.4% in June, the negative wholesale price inflation for ten months now further escalates pressure on the central bank to ease its monetary policy in its next policy review meeting on September 29. The CPI inflation data for August will be released later in the day.

Food inflation–for long an irritant in both the price gauges–touched -1.13% in August in the wholesale price index, against -1.16% in July, its meanest in at least since April 2005 when the current wholesale price index (WPI) series was launched. The WPI food inflation turned negative only three times in the current series, the first instance being in January 2012 when it had hit -0.67%. However, inflation in pulses continued to be very high, at 36.40% in August, further widening from 35.75% in the previous month. However, vegetable inflation remained in the negative territory, at -21.21% in August, against 24.52% in July.

Fuel and power inflation touched -16.50% in August, compared with -12.81% in July. WPI inflation in manufactured products eased further to -1.92% last month against -1.47% in July.

While trimming the benchmark lending rate by 25 bps in June, the third time in 2015, RBI governor Raghuram Rajan had termed the monsoon as the “biggest uncertainty” facing the economy and raised the bank’s retail inflation target by 20 bps to 6% by January 2016. Last month, Rajan kept the benchmark lending rate unchanged at 7.25% even though the government and industry had been urging for lowering the borrowing costs.

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