India’s wholesale price inflation dips to 2.04% in July

MUMBAI: India’s wholesale inflation, as measured by the Wholesale Price Index (WPI), dipped to 2.04 per cent on an annual basis in July, down from a 16-month high of 3.36 per cent in June, according to government data released on Wednesday.

A Reuters poll had forecasted inflation to moderate to 2.39 per cent.

In July, the annual inflation rate for Primary Articles under the WPI dropped to 3.08 per cent  from 8.80 per cent in June. Meanwhile, inflation for manufactured products rose to 1.58 per cent in July, up from 1.43 per cent in June. The inflation rate for fuel and power also increased, reaching 1.72 per cent compared with 1.03 per cent in June.

Earlier on Monday, India’s retail inflation for July slowed to 3.54 per cent, marking its lowest level in nearly five years, driven by a sharp decline in food inflation.

Essential food items

“The progress towards our goal of price stability has been uneven due to large and persistent supply-side shocks, particularly in food items,” stated Reserve Bank of India (RBI) Governor Shaktikanta Das during the recently concluded Monetary Policy Committee (MPC) meeting.

“We must therefore remain vigilant to ensure that inflation moves sustainably towards the target, while also supporting growth. This approach would be net positive for sustained high growth.”

Comments from MPC

During the August MPC meeting, the RBI kept its inflation forecast for this fiscal year unchanged at 4.5 per cent, despite cautioning about the trajectory of food prices, which may impact core inflation. The committee also noted that intensifying geopolitical tensions pose a risk to any relief from crude prices falling to multi-month lows.

The MPC voted to keep the interest rates unchanged at 6.5 per cent.

Das mentioned that while the MPC may overlook high food inflation if it is deemed temporary, the committee cannot afford to do so in the current environment of persistently high food inflation.

According to the households’ inflation expectations survey released by the RBI on Thursday, households anticipate inflation in India to rise by 20 basis points(bps) each over the next three months and the following year.