Key Takeaways
- India’s wholesale prices increased by 9.92% year-on-year in August.
- Retail inflation reached 4.82% year-on-year in August, up from 4.45% in July.
- Fuel and power prices surged 22.93% year-on-year, driven by global oil prices.
India’s wholesale prices rose by 9.92% year-on-year in August, according to government data. This increase was higher than the 9.78% rise recorded in July and exceeded economists’ average projection of 9.89% as per a Reuters poll.
The rise in wholesale prices was driven by a 7.05% year-on-year increase in food prices, following a 6.65% increase in July. Manufactured products also saw a 8.37% year-on-year rise, up from 8.29% in the previous month.
Fuel and power prices saw a significant increase of 22.93% year-on-year, compared to 20.05% in July. Petroleum and natural gas prices also rose by 34.41% year-on-year, up from 26.99% in July.
Retail inflation in August reached 4.82% year-on-year, marking a 0.37% increase from the previous month’s 4.45%. This is the third consecutive month that inflation has been above the Reserve Bank of India’s 4% medium-term target.
The increase in retail inflation was driven by higher food and fuel prices, with food inflation climbing to 5.95% in August from 5.52% in July. The weak monsoon showers contributed to the rise in food prices, with sharp increases in staples such as ginger, onion, and garlic.
Transport inflation also accelerated to 4.60% in August from 4.43% in July, adding to the overall inflationary pressures. The central bank left its benchmark policy rate unchanged at 5.25% in August, but minutes from the last monetary policy meeting showed that some officials favoured a rate hike if inflation spreads across segments.
India’s imports of nearly 85% of its oil needs, more than half from the Middle East, have been affected by supply disruptions due to the U.S.-Iran war, further contributing to the rise in fuel prices. Despite these challenges, India remains an outlier among regional peers such as Indonesia and the Philippines, which have raised rates in response to higher energy prices and currency volatility.
The Reserve Bank of India’s concerns over inflation have intensified as global oil prices remain near $108 a barrel, posing a threat to inflation pressures. The central bank’s next monetary policy meeting is scheduled for October, and the rate-hike concerns have intensified amid the sustained rise in global oil prices.
