High Input Cost in Manufacturing Resulted into Higher Inflation: Analysis

On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen exponentially over August 2020, when it stood at 0.41 per cent.

Sharing is caring!

Higher input prices, along with those of manufactured items, pushed India’s August 2021 wholesale inflation higher to 11.39 per cent.

The annual rate of inflation, based on wholesale prices, rose to 11.39 per cent last month from 11.16 per cent in July.

On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen exponentially over August 2020, when it stood at 0.41 per cent.

“The high rate of inflation in August 2021 is primarily due to rise in prices of non-food articles, mineral oils, crude petroleum and natural gas, manufactured products like basic metals, food products, textiles, chemicals and chemical products etc as compared the corresponding month of the previous year,” the ministry said in its review of ‘Index Numbers of Wholesale Price in India’ for August.

“The month over month change in WPI index for the month of August 2021 (as compared to July 2021) was 1.04 per cent.”

As per the data, Primary Articles segment, which has one of the highest weightage in the WPI, increased by 1.56 per cent to 155.8 (provisional index reading) in August, 2021 from 153.4 (provisional) in July 2021.

Fuel and Power segment, with a weightage of 13.15 per cent, rose by 1.49 per cent to 116 (provisional) in August 2021 from 114.3 (provisional) in July 2021.

Under it, LPG, petrol and diesel prices witnessed inflation of 48.1 per cent, 61.5 per cent and 50.7 per cent, respectively.

Manufactured Products, which has a weightage of 64.23 per cent, increased by 0.76 per cent to 133 (provisional) in August 2021 from 132 (provisional) in July 2021.

The WPI food index consisting of Food Articles from the Primary Articles group and Food Product from Manufactured Products group increased from 159.3 in July 2021 to 159.6 in August 2021.

However, the rate of inflation based on WPI Food Index decreased from 4.46 per cent in July 2021 to 3.43 per cent in August 2021.

“In spite of the primary food articles slipping into disinflation and a favourable base, the WPI inflation posted a surprise uptick to 11.4 per cent in August 2021, taking some sheen off the welcome easing displayed by the CPI inflation in the same month,” ICRA Chief Economist, Aditi Nayar said.

“The base effect is likely to drive primary food articles deeper into disinflation until November 2021, before a YoY inflation re-emerges from December 2021 onwards. With the late surge in rains in September, a delay in the Kharif harvest may be followed by late Rabi sowing, exacerbated by the YoY decline in reservoir levels.”

India Ratings and Research Principal Economist Sunil Kumar Sinha said: “Firming up of inflation despite weak demand conditions may appear somewhat perplexing, but as manufacturers are increasingly passing on the rising input costs to their output prices, both wholesale manufacturing and core inflation is showing sustained high inflation.”

Acuite Ratings and Research Chief Analytical Officer Suman Chowdhury said: “The divergent trend between CPI and WPI inflation indicates that the current inflationary risks are primarily emerging from the impact of commodity prices on manufacturing sector where further pass through is likely as demand continues to improve.”

“Although the food category may continue to provide relief in the near term, such transmission of production costs may keep core inflation at elevated levels.”

SMEStreet Edit Desk

SMEStreet Edit Desk is a small group of excited and motivated journalists and editors who are committed to building MSME ecosystem through valuable information and knowledge spread.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back to top button
%d bloggers like this: