August WPI inflation Eased To 5-Year Low Of 3.74%

India's wholesale price inflation in August eased to 3.74%, its lowest level in nearly five years, government data showed on Monday. The inflation measured on Wholesale Price Index (WPI) was at 5.19 per cent in July and 6.99 per cent in August 2013.

However, RBI has huge challenge to strike a balance between falling investments and reining in inflation while reviewing its monetary policy. The RBI is scheduled to review its monetary policy on September 30 and experts are of the view that the key interest rates would be left untouched as the central bank works towards 6 per cent retail inflation (CPI) by January 2016.

Food inflation came in at 5.15% compared to 8.43% on a monthly basis, the lowest level since January 2012. While the fuel and power inflation came in at 4.54% compared to 7.40% in July. Build up inflation rate in the financial year so far was 3.0% compared to a build up rate of 5.23% in the corresponding period of the previous year.

Primary articles (weight 20.12%)

The index for ‘Food Articles’ group rose by 2.6% on Y-o-Y basis due to higher price of fruits & vegetables (7%), urad and condiments & spices (4% each), arhar, barley and milk (3 % each), masur, gram and ragi (2% each) and jowar, rice, coffee, poultry chicken, fish-marine and wheat (1% each).  However, the price of tea (9%), fish-inland (7%), maize and pork (2% each) and egg and bajra (1% each) declined.

The index for ‘Non-Food Articles’ group rose by 0.3% on Y-o-Y basis due to higher price of flowers (15%), copra (14%), gingelly seed (6%), niger seed (5%), groundnut seed and linseed (2% each) and castor seed, mustard seed and cotton seed (1% each).  However, the price of raw rubber (6 %), soyabean, raw silk and raw jute (4% each), raw cotton (3%), fodder (2%) and sunflower (1%) declined.

The index for ‘Minerals’ group rose by 0.3% on Y-o-Y basis due to higher price of barytes (10%), iron ore (3%), steatite and magnesite (2% each) and chromite (1%).  However, the price of sillimanite (23%), copper ore (5%), zinc concentrate (4%) declined.

Fuel & power (weight 14.91%)

The index for this major group declined by 0.3% on Y-o-Y basis due to lower price of petrol and furnace oil (3% each) and bitumen (2%).  However, the price of high speed diesel (1%) moved up.

Manufactured products (weight 64.97%)

The index for this major group rose by 0.3% to 155.8 (provisional) from 155.4 (provisional) for the previous month. The groups and items for which the index showed variations during the month are as follows:-

The index for ‘Food Products’ group rose by 0.1% on Y-o-Y basis due to higher price of coffee powder (9%), copra oil (4%), gram powder (besan) (2%) and sugar, khandsari and sooji (rawa) (1% each).  However, the price of tea dust (blended) (7%), mixed spices and tea leaf (blended) (2% each) and bakery products, soyabean oil, gur and gingelly oil (1% each) declined.

The index for ‘Beverages, Tobacco & Tobacco Products’ group rose by 0.5% on Y-o-Y basis due to higher price of dried tobacco (6%), chewing tobacco (scented or not ) (2%) and beer and rectified spirit (1% each).

The index for ‘Textiles’ group rose by 0.1% on Y-o-Y basis due to higher price of tyre cord fabric (4%), jute sacking cloth and manmade fabric (2% each) and jute yarn and manmade fibre (1% each).  However, the price of gunny and hessian cloth (4%) and cotton yarn and jute sacking bag (1% each) declined.

The index for ‘Paper & Paper Products’ group rose by 0.2% on Y-o-Y basis due to higher price of paper cartons / boxes (2%) and printing and writing paper (1%).

The index for ‘Leather & Leather Products’ group rose by 1.7% on Y-o-Y basis due to higher price of leather footwear (3%).

The index for ‘Rubber & Plastic Products’ group rose by 0.2% on Y-o-Y basis due to higher price of plastic films & sheets and football (3% each), rubber footwear and reclaimed rubber (2% each) and plastic rolls and hdpe bag (1% each).  However, the price of plastic containers (3%) and woven sacks (2%) and pvc rigid and polyester chips (1% each) declined.

The index for ‘Chemicals & Chemical Products’ group rose by 0.5% on Y-o-Y basis due to higher price of rubber chemicals (5%), pesticides (2%) and agarbattis, explosives, turpentine oil, synthetic resin, dye & dye intermediates, vitamins, washing soap, organic manure, basic organic chemicals,  basic inorganic chemicals and non-cyclic compound (1% each).  However, the price of lacquer & varnishes, paints and washing powder (1% each) declined.

The index for ‘Non-Metallic Mineral Products’ group rose by 0.8% on Y-o-Y basis due to higher price of marbles (3%) and grey cement and railway sleeper (2% each).  However, the price of bricks & tiles (1%) declined.

The index for ‘Basic Metals, Alloys & Metal Products’ group declined by 0.2%  on Y-o-Y basis due to lower price of wire rods and pig iron (3% each), melting scrap (2%) and sponge iron, rounds, plates, steel rods, angles, pencil  ingots, gold & gold ornaments, joist & beams, fixtures and ferro chrome (1% each).  However, the price of steel castings, ferro manganese and nuts/bolts/screw/ washers (2% each) and aluminium, silver and rebars (1% each) moved up.

The index for ‘Machinery & Machine Tools’ group rose by 0.4% on Y-o-Y basis due to higher price of pvc insulated cable (6%), heat exchanger (4%), grinding /wet coffee machinery and loader (2% each) and conductor, insulators, electric switch gears, pump & assembly, electric switches and battery dry cells (1% each).  However, the price of washing / laundry machines (3%), ball/roller bearing and microwave oven (2% each) and fibre optic cable, material handling equipments and machine tools (1% each) declined.

The index for ‘Transport, Equipment & Parts’ group rose by 0.1% on Y-o-Y basis due to higher price of bi-cycles (2%) and bus / mini bus / truck (1%).