WPI inflation rises to four-month high of 3.24% in August

Inflation in tomatoes is expected to come down as prices have fallen drastically in September
Double-digit inflation in petrol and diesel, along with skyrocketing tomato prices, pushed the Wholesale Price Index (WPI)-based inflation up to a four-month high of 3.24 per cent in August, from 1.88 per cent in the previous month. 

This, along with rising Consumer Price Index (CPI)-based inflation, may prompt the Reserve Bank of India to not cut rates in its policy review next month. CPI-based inflation was at a five-month high of 3.36 per cent in August, compared to 2.36 per cent in July. 

Inflation in petrol jumped to 24.55 per cent in August, from 9.6 per cent in the previous month, showed the official data. Similarly, diesel moved up to 20.30 per cent from 5.49 per cent in this period. 

Aditi Nayar, principal economist with ICRA, said the continued rise in crude oil prices is expected to push up the mineral oils sub-index in the ongoing month. “However, the subsequent upside risk posed by crude oil and other fuels is likely to be limited,” she said. 

She said the Brent crude may not sustain beyond $55 a barrel. Also, daily adjustment in domestic retail prices would not allow any shock.

Altogether, inflation in fuel and power doubled to 9.99 per cent from 4.37 per cent. Food inflation more than doubled to 5.75 per cent from 2.15 per cent. Inflation in tomatoes rose to 259.7 per cent 209.56 per cent. 

Inflation in tomatoes is expected to come down as prices have fallen drastically in September. Onions saw inflation of 88.46 per cent from deflation in the previous few months. 

Even after taking out volatile inflation of fuels and food, core inflation rose to 2.6 per cent from 2.1 per cent due to rise in metal prices.

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