The WPI (wholesale price index)-based headline inflation has crept up to 7.55 per cent in August from 6.87 per cent in July owing to rising prices of food items as well as manufactured goods.
Even as the bold reform measure aimed at partly rationalising fuel subsidies will put an additional burden on the common man, economists and apex industry chambers, in particular, have hailed the step as the government’s first initiative towards fiscal consolidation while hoping against hope that the Reserve Bank of India (RBI) would do its bit to boost investment and growth by easing key policy rates on September 17.
However, even though the overall inflation in August this year is well below the level of 9.78 per cent that prevailed in the same month of 2011, the apex bank is unlikely to oblige India Inc in view of the continuing inflationary expectations, and the cascading effect of higher diesel prices to the extent of about 80-100 basis points.
The WPI inflation data for August revealed that even as food inflation eased marginally to 9.14 per cent in August from 10.06 per cent in the previous month, the worrying factor is that manufacturing or core inflation, which had shown a down trend in previous months, also inched up to 6.14 per cent from 5.58 per cent in July on account of higher prices of cotton textiles, paper and paper products, cement and lime.
Admittedly, with transportation costs going up in the days ahead following the over Rs. 5 per litre hike in diesel prices, a spike in the prices of food articles as well as manufactured goods starting from steel and cement to consumer goods is a certainty although the intensity is likely to vary depending on the absorption capacity of the producing units. As per the WPI data on food articles, pulses turned dearer by 34.39 per cent while wheat and cereal prices went up by 12.85 per cent and 10.71 per cent, respectively, in August on a year-on-year basis. Meanwhile, headline inflation for June was revised up to 7.58 per cent from 7.25 per cent.