NEW DELHI — India’s wholesale price pressure is refusing to cool. WPI inflation rose to 9.92% in August, keeping the annual rate close to 10% for the fourth consecutive month and putting renewed pressure on the cost base of Indian businesses.
The Wholesale Price Index rose from 9.78% in July, according to provisional data released by the Ministry of Commerce and Industry on Monday. The August reading was also slightly higher than the 9.89% forecast in a Reuters poll of economists.
Fuel is where the sharpest increase is showing. Fuel and power inflation jumped to 22.93% from 20.05% in July. Mineral-oil prices rose 38.48%, while inflation in crude petroleum and natural gas accelerated to 34.41%, compared with 26.99% a month earlier. Electricity was the exception, recording a 1.73% year-on-year decline.
For companies, the problem is not limited to the price of fuel itself. Higher energy and transportation costs can work their way through manufacturing, logistics and distribution, putting pressure on margins even before a product reaches the customer.
Manufactured products also became more expensive. Inflation in the category increased to 8.37% from 8.29% in July. Chemical products recorded inflation of 14.30%, while rubber and plastic products rose 11.18%. Food-product manufacturing inflation climbed to 9.65% from 8.89%.
The food picture was also firmer. The WPI Food Index, which carries a 24.99% weight, rose 7.05% in August against 6.65% in July. Food articles recorded inflation of 5.67%.
Not every part of the wholesale basket moved higher. Inflation in primary articles eased to 7.76% from 8.52%, helped by softer pressure in non-food articles and minerals. The decline, however, was not enough to offset the increase in fuel and manufactured goods.
The more interesting part of the data is the widening gap between wholesale and retail inflation. Consumer inflation stood at 4.45% in July, less than half the August WPI rate. The difference suggests that a substantial part of the increase in input costs has yet to show up fully in consumer prices, or is being absorbed somewhere along the production and distribution chain.
That puts margins in focus. Companies facing higher fuel, chemical, transport and processed-food costs have three choices: absorb the increase, accept lower margins or eventually raise selling prices.
