With a favourable base effect, wholesale inflation based on Wholesale Price Index (WPI) dipped to 2.04 per cent in July, data released on Wednesday by the commerce and industry ministry showed. It was 3.36 per cent in June.
“Positive rate of inflation in July 2024 is primarily due to increase in prices of food articles, manufacture of food products, mineral oils, crude petroleum and natural gas, other manufacturing etc,” the ministry said in a statement. Earlier, data released by the statistical ministry showed retail inflation based on Consumer Price Index (CPI) dropped to a nearly five-year low at 3.54 per cent.
The annual rate of inflation for primary articles of WPI stood at 3.08 per cent in July, as compared to 8.8 per cent in June. The annual rate of inflation for fuel and power of WPI increased to 1.72 per cent in July, from 1.03 per cent in June. The annual rate of inflation for the manufactured products group of WPI increased to 1.58 per cent in July, from 1.43 per cent in June, the Department for Promotion of Industry and Internal Trade (DPIIT) posted on X.
The Reserve Bank of India (RBI), which mainly takes into account retail inflation while framing the monetary policy, kept the benchmark interest rate or repo rate unchanged at 6.5 per cent for the ninth consecutive time in its August monetary policy review.
According to Shreya Sodhani, Regional Economist with Barclays, July inflation data for both wholesale and retail price indices was overwhelmingly influenced by base effects, which masked the sequential food-price pressures. “We think food prices are likely peaking, with early price data from August showing a fall in select vegetable prices. Manufacturing costs still remain benign despite rising consistently for three months now, contained by lower commodity prices. We think the RBI is likely to look through the current drop in inflation, and assess the impact of monsoons on food prices, before considering monetary easing. We expect a window for rate cuts to open in December 2024, with risks skewed towards a later cut than earlier,” she said.
Rahul Agrawal, Senior Economist at ICRA, said: “ the core (non-food manufacturing) WPI continued to inch up for the fifth consecutive month, touching a 17-month high of 1.2 per cent in July, even as the index contracted on a sequential basis for the second consecutive month. Further the near-term outlook for the WPI inflation remains benign.”
As per data released by the Consumer Affairs Department, the prices of a majority of food items have dipped on a sequential basis in August so far, amid a pick-up in monsoon and a healthy progression in kharif sowing. “This is likely to aid in containing the base effect-led uptick in the primary food articles inflation print in the ongoing month,” Agrawal said.