Wholesale inflation falls to 3-month low of 2.04% in July as food prices ease

New Delhi: Wholesale inflation fell to a 3-month low of 2.04 per cent in July on decline in prices of food items especially vegetables, government data released on Wednesday showed.

The decline in wholesale price index (WPI) based inflation in July came after it rose for four months in a row till June, when it was 3.36 per cent. It was (-) 1.23 per cent in July last year.

In April wholesale inflation stood at 1.19 per cent.

As per the data, food inflation in July was 3.45 per cent, down from 10.87 per cent in June, mainly due to month-on-month decline in prices of vegetables, cereals, pulses and onion.

Vegetables recorded a deflation of 8.93 per cent in July, against a 38.76 per cent inflation in the previous month.

"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 & natural gas, other manufacturing etc," the Commerce and Industry Ministry said in a statement.

The annual rate of inflation of the manufactured Products group increased to 1.58 per cent in July 2024, from 1.43 per cent in June 2024.

Inflation in fuel and power basket rose to 1.72 per cent in July, from 1.03 per cent in the previous month.

ICRA Senior Economist Rahul Agrawal 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 2024, even as the index contracted on a sequential basis for the second consecutive month.

"The near-term outlook for WPI inflation remains benign. As per the data released by the Department of Consumer Affairs, the prices of a majority of food items have dipped on a sequential basis in August 2024 so far, amid a pick-up in the 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. Overall, ICRA expects the WPI inflation to remain unchanged at 2 per cent in August 2024," Agrawal said.

The decline in July WPI was in line with the retail inflation data for the month. Retail inflation fell to a near 5-year low of 3.54 per cent in July, data released earlier this week showed.

Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry said, "Going ahead, we expect the continuous softening of WPI inflation to reduce the costs of production levels and boost consumption demand in the country." 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 for the ninth consecutive time in its August monetary policy review at 6.5 per cent.

The decline in July food inflation would provide a breather to the RBI which had earlier this month said that the interest rate setting monetary policy committee (MPC) cannot ignore persistent high food inflation.

"The MPC (monetary policy committee) may look through high food inflation if it is transitory; but in an environment of persisting high food inflation, as we are experiencing now, the MPC cannot afford to do so," RBI Shaktikanta Das said in his policy review statement.

"It (MPC) has to remain vigilant to prevent spillovers or second round effects from persistent food inflation and preserve the gains made so far," he had said.