Food prices drive WPI inflation to 4-month high of 0.52% in August

Primary food articles recorded a reduced deflation in August, led by an acceleration in the prices of wheat, milk and protein-rich items like egg, meat & fish

India’s factory gate inflation based on the wholesale price index (WPI) rose to a four- month high of 0.52 per cent in August, on the back of an increase in the prices of food and manufacturing products, according to the data released by the Ministry of Commerce and Industry on Monday.

 

The WPI was at a two-year low of -0.58 per cent in July.

 

Data showed that primary food articles recorded a reduced deflation (-3.06 per cent) in August, led by an acceleration in the prices of wheat (4.75 per cent), milk (2.58 per cent) and protein-rich items like egg, meat & fish (0.06 per cent). Prices of other food items like pulses (-14.85 per cent) and vegetables (-14.18 per cent) rose during the month, yet they still remained in the deflationary zone.

 

 

Meanwhile, prices of onion (-50.46 per cent), potato (-44.1 per cent) and fruits (-4.86 per cent) went into further deflation during the month. 

 

Data further showed that the prices of manufactured products, which carry a weightage of 64 per cent in the index rose 2.55 per cent in August. This was due to an acceleration in the prices of manufactured food products (7.15 per cent), vegetables & animal oils (22.9 per cent), tobacco (2.22 per cent), textiles (1.4 per cent), cement, lime & plaster (4.23 per cent), semi furnished steel (1.31 per cent) among others.

 

However, the prices of manufactured beverages (1.19 per cent) and apparel (1.96 per cent), leather (2.4 per cent), wood products (0.33 per cent) and paper products (0 per cent) decelerated during the month. 

 

On the other hand, fuel and power prices declined further (-3.2 per cent) in August as the low global commodity prices, especially of mineral oils, led to the decline in the prices of petrol and high speed diesel for the 15th and 28th month in a row. Cooking gas prices also fell

(-1.22 per cent) for the first time in four months.

 

Rahul Agrawal, senior economist, Icra Ratings, said that aided by an unfavourable base effect, the WPI expectedly reverted to an inflation in August after a gap of two months, and the hardening was broad based across all segments. Food items accounted for as much as 73 of the 110 basis points (bps) uptick in the headline WPI in August, followed by 27 bps uptick by core WPI, which rose to a 5-month high of 1.6 per cent.

 

“Icra expects the headline WPI to rise further to a 6-month high of 0.9 per cent in September, led by a hardening in the Y-o-Y prints for global crude oil and commodity prices, as well as the depreciation in the USD/INR pair. While the expectations of a relatively more favourable CPI inflation trajectory following the GST rationalisation opens up space for a rate cut by the MPC, the positive impact of the same on growth outcomes in H2 FY26, along with the stronger-than-expected GDP growth in Q1 is likely to result in a status quo in the upcoming October 2025 review meeting,” he added.

 

The rise in WPI inflation comes days after data showed that India’s retail inflation also witnessed an uptick to 2.07 per cent in August from an eight-year low of 1.61 per cent in July, aided by a low base effect and a reduction in deflation in food prices.