Wholesale inflation remains elevated despite a marginal easing, with food and manufacturing prices continuing to put pressure on the economy
India’s wholesale inflation eased marginally to 9.78 per cent in July from 9.87 per cent in June, government data released on Friday showed, as inflation in fuel and power prices moderated.
The July reading was lower than the 9.95 per cent increase economists polled by Reuters had expected. June’s 9.87 per cent reading was the highest recorded under India’s new Wholesale Price Index (WPI) series, which uses 2022-23 as the base year.
The data comes two days after separate government figures showed that India’s retail inflation rose to 4.45 per cent in July from 4.38 per cent in June. The rise in consumer inflation was driven largely by higher food prices.
The latest WPI figures suggest that price pressures at the wholesale level remain strong even as the overall pace eased slightly in July.
Fuel and power inflation falls
Inflation in the fuel and power basket fell sharply to 20.05 per cent in July, from 27.41 per cent in June.
The category had been one of the biggest contributors to wholesale price pressures in recent months. Its inflation rate had stood at 30.33 per cent in May before falling to 27.41 per cent in June.
More from BusinessThe moderation in July helped offset higher inflation in some other components of the wholesale price index.
India has also been facing renewed energy-price risks because of the ongoing conflict involving the US and Iran. Higher global oil prices can raise input and transportation costs for businesses and add to inflationary pressures.
Food inflation remains elevated
Inflation in the WPI food index rose to 6.65 per cent in July, from 6.14 per cent in June.
The food index covers food articles in the primary articles group as well as manufactured food products. Food inflation had risen sharply in June from 4.49 per cent in May.
The increase in wholesale food prices is also consistent with the recent rise in retail food inflation. Consumer food inflation climbed to 5.52 per cent in July, according to the latest CPI data.
Higher prices of food items such as vegetables and other perishables have been a key source of pressure, with uneven rainfall affecting supplies in some parts of the country.
Primary articles inflation rises
Inflation in primary articles increased to 8.52 per cent in July, from 7 per cent in June.
Primary articles include items such as food articles, minerals and crude petroleum and natural gas.
The increase indicates that price pressures in raw materials and basic commodities remained firm despite the overall moderation in WPI inflation.
Manufacturing inflation also climbs
Inflation in manufactured products rose to 8.29 per cent in July, compared with 7.48 per cent in June.
The increase is significant because manufactured products account for the largest weight in the WPI basket. Under the new 2022-23 WPI series, manufactured products carry a weight of about 64.23 per cent, while primary articles account for 22.62 per cent and fuel and power 13.15 per cent.
The new WPI series covers 697 commodities and is compiled by the Office of the Economic Adviser under the Department for Promotion of Industry and Internal Trade (DPIIT).
What does the WPI data mean for inflation?
The latest numbers present a mixed picture.
On one hand, headline wholesale inflation eased slightly and fuel and power inflation fell sharply. On the other, inflation in primary articles, manufactured products and food increased.
That combination suggests that inflationary pressures have not disappeared and could continue to affect businesses through higher input costs.
Retail inflation remains more important for the Reserve Bank of India when it assesses its monetary policy mandate. CPI inflation of 4.45 per cent in July remained within the RBI’s 2-6 per cent tolerance band, but was above its medium-term target of 4 per cent for a second consecutive month.
The RBI recently kept its policy rate unchanged as it assessed whether the recent increase in inflation would prove temporary or become broader and more persistent.
For now, the July WPI data points to continued price pressure in the economy, even though the headline rate has moved down slightly from June’s record under the new series.
