 "WPI inflation cools to 3-month low of 2.04% in July as food prices decline")
India's wholesale price index (WPI) inflation cooled to a three-month low of 2.04 per cent in July from a 16-month high of 3.36 per cent in June, primarily on the back of a sharp reduction in food prices.
The food price inflation stood at 3.45 per cent during the month as compared to 10.87 per cent in the preceding month.
The data released by the Ministry of Commerce and Industry on Wednesday showed that the inflation of other major sub-indices like manufactured products and fuel and power witnessed a slightly higher year-on-year (Y -o-Y) print in July.
Within food articles, prices of vegetables (-8.93 per cent) and egg, meat and fish (-1.59 per cent) contracted, while there was also a slight deceleration in the prices of onion (88.77 per cent), cereals (8.96 per cent), paddy (10.98 per cent) and pulses (20.27 per cent). On the other hand, the prices of potato (76.23 per cent) and fruits (15.62 per cent) accelerated during the month.
The manufactured products, which have a weight of 64.2 per cent in the index also saw a rise in inflation to 1.58 per cent in July from 1.43 per cent in June. This was led by an acceleration in the prices of manufactured beverages (2.14 per cent), tobacco (2.31 per cent), textiles (2.09 per cent), wood products (3.53 per cent) and pharmaceuticals (2.05 per cent) among others.
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The factory gate prices for fuel and power (1.72 per cent) accelerated in July as the prices of cooking gas (6.06 per cent) rose sharply. The prices of high-speed diesel (-1.65 per cent) and petrol (-0.64 per cent) rose, but remained in contraction during the month.
Rajani Sinha, chief economist, CARE Ratings says that the moderation in WPI inflation was primarily driven by a decline in the inflation of primary articles, even as inflation for manufactured products and fuel and power increased.
“The arrival of early kharif harvests in the second half of September is expected to cool this sequential momentum in food prices. However, it will be crucial to monitor the temporal and spatial distribution of the monsoon and the progress of kharif sowing. Globally, commodity prices, which had been rising through the first half of calendar year 2024, have eased over the past couple of months. However, external risks emerging from ongoing geopolitical tensions need to be monitored,” she added.
This cool down in factory gate inflation comes days after retail inflation dropped to nearly five-year low of 3.54 per cent in July due to the high-base effect and reduction in food prices. Although the Reserve Bank of India (RBI) tracks retail inflation for its monetary policy, the reduction in WPI may help in keeping the retail inflation low, though with a time lag.