India wholesale prices fall for tenth straight month

India wholesale prices fall for tenth straight month
PHOTO: Reuters

NEW DELHI - India's wholesale prices fell for a tenth straight month in August, government data showed Monday, pulled down by falling fuel costs and hiking prospects of an interest rate cut.

The Wholesale Price Index (WPI), an inflation indicator that measures the biggest basket of goods, fell 4.95 per cent last month compared with a year earlier, after slipping 4.05 per cent in July, the commerce ministry said.

Economists surveyed by Bloomberg had estimated that the WPI would slump 4.4 per cent.

"Wholesale price inflation has now been in negative territory for ten consecutive months, and is at its lowest since monthly prices started being tracked in 2005," Capital Economics analyst Shilan Shah said.

"This strengthens our view that interest rates will be cut at the RBI's policy meeting later this month."

The figures come hours before data on consumer prices is due to be released that the Reserve Bank of India (RBI) uses to track interest rates. Retail inflation is forecast to ease, Bloomberg has predicted.

Pressure has been growing for a cut in interest rates after RBI governor Raghuram Rajan kept them on hold last month after three earlier cuts this year.

India's economy slowed to seven per cent in the first quarter of the current financial year, matching China and outpacing most major economies, but down from 7.5 per cent in the previous quarter.

Prime Minister Narendra Modi's business-friendly government is keen for a further cut as it seeks to quicken the pace of growth in Asia's third-largest economy.

But Rajan is concerned about a renewed rise in inflation in a country where food and other price hikes cause huge hardship for tens of millions of poor.

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