August WPI inflation rises to 6.1%; puts pressure on RBI

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August WPI inflation rises to 6.1%; puts pressure on RBI
WPI inflation for August surged to 6.1%, rising 1.1% in comparison to the previous month and way above analysts estimate of 5.8%. The August RBI inflation reading would worry policy makers at the RBI, who meet on Sept 20, to decide on policy action.

"The annual rate of inflation, based on monthly WPI, stood at 6.10% for the month of August, 2013 (over August, 2012) as compared to 5.79% (provisional) for the previous month and 8.01% during the corresponding month of the previous year," a government release states.

The index for 'Food Article ' group rose by 5.3 percent in comparison to the previous month and was one of the prime drivers for inflation. This was largely on account of higher price of fish-inland, fruits & vegetables beef & buffalo meat.

Inflation in the fuel and power segment rose by 1.3 percent in comparison to the previous month due to higher price of aviation turbine fuel (7%), light diesel oil (4%), kerosene, lpg and petrol (3% each) and naphtha, bitumen and high speed diesel (2% each).

Interestingly, the index for manufactured products declined by 0.1 percent.

The June WPI inflation has been revised to 5.16 percent as compared to 4.86 percent earlier.

The unhealthy inflation reading now further dims the RBI prospects of a rate cut anytime soon. Analysts say that the August WPI inflation reading would now even raise the prospects of the RBI hiking rates in its forthcoming credit policy scheduled for Sept 20.

The RBI would now face a dilemma on battling inflation, preventing a rupee fall or helping growth in the economy.

Read more about: wpi inflation
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