Wholesale inflation in India cools down to 1.31% in August
India's wholesale inflation has dipped below 2% for the first time in four months. The decrease is attributed to a reduction in commodity and food prices. Data released today reveals that the wholesale inflation rate fell to 1.31% in August, down from 2.04% in July. This downward trend is expected to continue if crude oil prices remain stable at their current levels.
Wholesale and consumer inflation rates show divergence
Interestingly, the trajectory of wholesale prices has diverged from consumer inflation. While the former has seen a decrease, consumer inflation rose slightly to 3.65% from 3.6%. This increase in consumer price index is primarily due to persistent food inflation, particularly in vegetables, pulses, and cereals. Additionally, a rise in service inflation has also contributed to this upward trend.
Crude oil prices impact on wholesale inflation
Brent crude oil prices have been fluctuating near a three-year low of $70. An earlier analysis by Moneycontrol suggested that prolonged lower crude oil prices could disrupt the government's fiscal calculations, potentially leading to lower nominal growth than previously forecasted. A $10 drop in crude oil leads to a 50-bps or 0.5% point decrease in the wholesale price index, which makes up about 60% of the GDP deflator.
