WPI Inflation For Aug Slumps To -4.95%; Increases Pressure On RBI To Cut Rates

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The Wholesale Price Inflation for the month of Aug 2015 dropped to -4.95 per cent, from -4.05 per cent, sparking worries of deflationary kind of prices.

The fall in WPI inflation will now raise pressure on the Reserve Bank of India to cut repo rates fast.

WPI Inflation For Aug Slumps To -4.95%; Increases Pressure On RBI To Cut Rates
WPI Inflation for Aug 2015 declined largely on the back of a sharp fall in commodity prices. The only worry was the increase in food articles inflation which was up 2.6 per cent (month-on-month) largely on the back of higher fruits and vegetable prices.

The biggest decline was seen in fuel and power, which dropped 4.5 per cent in the month of Aug 2015, as compared to the previous month, on a decline in furnace oil, aviation turbine fuel and diesel.

Manufactured index increased by a marginal 0.4 per cent compared to the previous month.

The CPI inflation will be declared later today and would be the key to the RBI's decision on an interest rate cut later this month. Most industrialists and analysts are now factoring in a 25 basis points cut in the Reserve Bank of India (RBI's) repo rate cut. Read difference between CPI and WPI Inflation 

Today's accelerating WPI inflation into the negative territory raises the prospect and worry of a price deflation rather than inflation, as right pointed out by chief economic adviser Arvind Subramanian.

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