The FINANCIAL — India’s wholesale price index fell for the 10th month in a row in August, dragged by low global commodity prices and strengthening the case for the central bank to resume lowering interest rates later this month, according to Nasdaq.
The index fell 4.95% from a year earlier, much more than the 4.05% decline in July, government data showed on September 14. It also exceeded the 4.3% decline predicted by economists polled by The Wall Street Journal.
Fuel prices declined 16.5% year-over-year and 4.5% from July. State-run fuel retailers had cut prices in August on cheaper crude oil in international markets.
Food prices also fell from a year earlier, however, they were up from July due to a sharp rise in the price of onions. They fell 1.13% from last year. From July, food prices were up 2.6%, with onions, a key staple in Indian meals, costing 63% more.
The sustained fall in wholesale prices could fuel concerns that the South Asian economy faces a deflationary threat even though consumer prices are rising.
India’s Chief Economic Adviser Arvind Subramanian said earlier this month that deflation is a greater worry for the country than inflation.
The government is next scheduled to release the consumer prices inflation data later on September 14. A poll of economists by The Wall Street Journal has predicted the consumer inflation rate would fall to a 9-month low of 3.5% year-over-year in August, much below the Reserve Bank of India’s 6% target for January.
“We are maintaining our view that the RBI will cut the repo rate by another 25 basis points to 7% at its next policy meeting on 29th September before the easing cycle concludes,” said Shilan Shah, India economist at research firm Capital Economics.
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