India's wholesale inflation rises to 4-month high in August
What's the story
India's wholesale price index (WPI) inflation rose to a four-month high of 0.52% in August, government data released today showed. The increase comes after the WPI had hit a 25-month low of -0.58% in July. The rise is mainly due to marginal increases in the prices of food items, mineral oils, crude petroleum and natural gas, and basic metals manufacturing.
Inflation trends
Manufactured products rose to 2.55% in August
Retail food inflation remained negative for the third consecutive month but at a slower pace. Manufactured products, which account for nearly two-thirds of the WPI basket, rose to a four-month high of 2.55% in August from 2.05% last month.
Future projections
GST rate cuts expected to cool prices further
Economists expect prices to cool further with the implementation of GST rate cuts from September 22. The GST council approved a two-rate structure earlier this month, moving 90% of items into lower tax brackets of 5% and 12%. A low wholesale inflation print also supports India's growth outlook as WPI forms a major portion of the GDP deflator used to calculate real GDP from nominal data.
Monetary policy
RBI likely to maintain rates during monetary policy review
The combination of high growth and low inflation is likely to prompt the Reserve Bank of India (RBI) to maintain rates during its monetary policy review from September 29-October 1. The central bank has already cut the repo rate by 100 basis points this year to 5.5%. Economists expect one more cut of 25 bps later in the year amid tariff pressures and potential easing by the US Federal Reserve expected later this week.