India's Wholesale Price Index In Deflation For Fifth Straight Month, Sees Softest Drop In August

India's wholesale price index (WPI) inflation shrank to 0.52% in August, in line with expectations. This would mark the fifth consecutive month where the country's WPI is in deflation. However, the latest WPI print is also the softest decline in five months. The latest fall is due to a decline in mineral oils, basic metals, chemical & chemical products, textiles and food products.

In the previous month, dropped to 1.36% followed by a huge decline of 4.12% in June 2023. WPI has been negative since April 2023.

WPI registered a 3.48% decline in May and a 0.79% decline in April.

In a release on September 14, the Ministry of Commerce & Industry said, the annual rate of inflation based on all India Wholesale Price Index (WPI) numbers is (-) 0.52% (Provisional) for August 2023 (over August 2022) against (-) 1.36% recorded in July 2023. The negative rate of inflation in August 2023 is primarily due to a fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products as compared to the corresponding month of the previous year.

Except for primary articles and food index, the WPI rate in fuel & power and manufactured products was in negative.

The inflation rate was at 6.34% in primary articles, -6.03% in fuel & power; -2.37% in manufactured products, and 5.62% in food index during August.

The ministry highlighted that the month-over-month change in the WPI index in August stood at 0.33% as compared to July 2023.

Here's how the major commodities that are parameters to draw the WPI inflation rate have performed on a month-on-month basis:

1. Primary Articles which has a weightage of 22.62% in overall WPI, declined by 0.47% to 189.6 (provisional) in August 2023 from 190.5 (provisional) in July. Prices of Crude Petroleum and natural Gas (5.25%), Minerals (3.56%) and Non-food Articles (0.25%) increased in the month under review as compared to July. Prices of Food Articles (-1.52%) declined as compared to July.

2. Fuel & Power which has a weightage of 13.15% increased by 2.96% to 149.6 (provisional) in August from 145.3 (provisional) for July. Prices of Mineral Oils (4.02%) and Electricity (1.79%) increased in August as compared to July.

3. Manufactured Products have the highest weightage in WPI to the tune of 64.23%. This commodity index increased by 0.14% to 139.8 (provisional) in August from 139.6 (provisional) in July.

Out of the 22 NIC two-digit groups for manufactured products, 15 groups witnessed an increase in prices whereas 6 groups witnessed a decrease in prices. The price increase is mainly contributed by food products; electrical equipment; computer, electronic & optical products; other manufacturing; printing & reproduction of recorded media; motor vehicles, trailers & semi-trailers etc. Some of the groups that witnessed a decrease in prices are chemical & chemical products; paper & paper products; machinery & equipment; fabricated metal products, except machinery & equipment; pharmaceuticals, medicinal chemicals & botanical products; furniture etc. in August 2023 as compared to July 2023.

Lastly, the WPI Food Index, holding 24.38% weightage, decreased from 187.7 in July to 186.1 in August. The rate of inflation based on the WPI Food Index decreased from 7.75% in July 2023 to 5.62% in August 2023.

The WPI for August 2023 has been compiled at a weighted response rate of 85.7% while the final figure for June 2023 is based on the weighted response rate of 94.6%.

The WPI print for September 2023 will be released on October 16, 2023.