However, favourable base effect will come into play in the upcoming months. As
had inched up above 7 per cent towards the end of 2019, it is set to moderate in upcoming months.
Experts are factoring in a favourable harvest of the kharif crop, owing to good rains. “With favourable monsoon and prospect of good kharif and rabi crops, India Ratings expects that food inflation will ease from here on,” Sunil Kumar Sinha, principal economist at the agency said in a note. Inflation in vegetables, pulses, eggs, and meat remained above 10 per cent in all these food categories. For the staples, rice and wheat, it dipped below 6 per cent after four months.
As consumer inflation remained hard, the wholesale price index (WPI)-based inflation made a comeback in August, with a marginal 0.16 per cent rise after four months in deflation. Wholesale inflation
had reached a 4.5-year low of negative 3.4 per cent in June 2020, after which it has been consistently rising.
It was pulled up by the rising prices of manufactured products in August, whose WPI inflation at 1.3 per cent is a 15-month high. Among the sub-segment, prices of manufactured food products rose the fastest at 4.7 per cent, as vegetable oils and animal oils, fats saw a sudden uptick in their prices. However, seven of the 14 components within the manufactured products segment have recorded a contraction in the latest month.
On the other hand, food inflation rose 3.8 per cent, lower than July’s 4.1 per cent. The modest decline in food inflation was driven by the downtrend in items such as cereals, pulses, vegetables, and milk. Experts said the sudden inflationary pattern in August indicates an improvement in purchasing power of manufacturers, and bodes well for economic recovery.