Wholesale price index based inflation rose for the fourth straight month and soared to a near two-year high in July due to costlier food items such as potatoes and pulses, as well as the impact of an adverse base effect.
WPI inflation in July was 3.55 per cent, according to data released on Tuesday, against 1.62 per cent in June. It had contracted to a negative 4 per cent in July 2015. Wholesale inflation had peaked to 3.74 per cent in August 2014.
The data come at a time when July retail inflation also shot up to 6.07 per cent on the back of costlier food items.
In July, the WPI food basket registered double-digit growth in inflation at 11.82 per cent against 8.18 per cent a month ago. Among food items, potato registered the highest inflation of 58.78 per cent in July.
WPI inflation in pulses shot up to 35.76 per cent and for vegetables rose to 28.05 per cent. The rate of inflation in sugar was 32.33 per cent and that for fruits rose 17.30 per cent during the month. WPI inflation in fuel and power was at a negative 1 per cent against a negative 3.62 per cent in June.
Despite calls for a rate cut to spur industrial growth, the RBI had left the repo rate unchanged in its monetary policy review of August 9 on concerns over inflation.
Noting that the price rise was higher than market expectations, analysts said WPI inflation may ease once the monsoon’s impact on the kharif output becomes clear.
“Even though the monsoon has been favourable, inflation is expected to continue to be under pressure. While we had projected a WPI inflation rate of about 2 per cent by end March, the trajectory needs to be watched,” said CARE Ratings.
Noting that an adverse base effect impacted the WPI data, Aditi Nayar, Senior Economist, ICRA, said food inflation may cool in the coming months.
Industry chamber Assocham urged the government to address demand-supply issues faced by industry and minimise translation of the price rise from WPI to CPI.