August CPI inflation to come out today

Rising vegetable prices, 8.54% depreciation in rupee in August to influence data

Amid rise in prices of vegetables, the retail-price inflation for the month of August will be announced later today.

The rupee depreciated 8.54% in August which would also push up imported inflation. However, global commodity prices are still low, barring oil, due to weak demand and it may offset the impact of depreciating rupee. The Economist’s commodity-price index fell 16.5% in dollar terms during the year ended July, 2013.

Oil marketing companies had hiked petrol prices by 70 paise and diesel by 50 paise a litre on July 31 and then Rs 2.35 and 50 paise a litre respectively on August 31. The price increase effected from the midnight of July 31 will reflect in the August data. The Syrian crisis that took some turn towards resolution in September, had remained unresolved till August and attack by US and its allies had looked imminent that time.

On the other hand, vegetable prices were still on the upward trend, though some easing was witnessed in second half of August, analysts said.

Consumer price index (CPI)-based inflation declined to 9.64% in July from 9.87% in the previous month. However, the decline was not uniform across the country as urban areas witnessed a rise in inflation, while rural areas saw a fall. Inflation rose to 10.26% in July from 10.16% in June in urban areas, while it declined to 9.14% in villages from 9.63%.

Wholesale price index (WPI)-based inflation, on the other hand, rose to 5.79% in July from 4.86% in June. This was bit unusual since the trend usually is of decline in wholesale price index based inflation and rise in consumer price index based inflation since food prices have higher weight in the latter.

It was mainly food inflation, which has been rising recently, while the rate of price rise in manufactured items has been on the decline due to low demand in the economy and falling global rates.

Inflation is a key factor for RBI to change its monetary stance amid falling economic growth numbers. Economic growth fell to over four-year low of 4.4% in the first quarter of the current financial year.

RBI has said it will use all its tools to keep wholesale price index based inflation to 5% by March end, 2014. RBI does not give projections for the consumer price index-based inflation, which had started coming out from 2012.