WPI inflation falls 0.58 pc in July, food prices spike

WPI inflation falls 0.58 pc in July, food prices spike

The wholesale price-based inflation stood at (-)0.58 pc in July, remaining in the negative zone for the fourth straight month even as vegetables and other food items turned costlier.

WPI inflation in June was (-) 1.81 percent, while for the month of May and April it was (-) 3.37 percent and (-) 1.57 percent respectively.

"The annual rate of inflation, based on monthly WPI (Wholesale Price Index), stood at (- 0.58 percent) (provisional) for the month of July 2020 as compared to 1.17 percent during the corresponding month of the previous year," the commerce and industry ministry said in a statement.

Inflation in food articles was at a four-month high level of 4.08 percent in July, mainly due to a sharp rise in vegetable prices. Inflation in vegetables stood at 8.20 percent, against (-) 9.21 percent in June.

Pulses saw inflation of 10.24 percent, while for potato it was 69.07 percent in July. Protein-rich items like egg, meat, and fish saw a hardening of prices with inflation at 5.27 per cent.

However, onion prices softened and inflation fell 25.56 percent, while in fruits it was (-) 3.03 percent.

Inflation in fuel and power basket fell 9.84 percent in July, compared to 13.60 percent drop in the previous month.

Manufactured products, however, witnessed inflation of 0.51 percent in July, against 0.08 percent in June.

ICRA Principal Economist Aditi Nayar said the considerable narrowing in the WPI disinflation in July 2020 relative to the previous month, was along expected lines, with a correction in the index levels for crude oil and mineral oils, further narrowing of the core disinflation and a rise in food inflation.

"The surge in tomato prices and a moderate rise in potato prices pushed up the vegetable inflation in July 2020, contributing to the uptick in the inflation for primary food articles to a four-month high.

"While the inflation for pulses remained steady in double-digits, cereal inflation eased appreciably, to a mild 0.75 percent in July 2020, offering a modicum of relief," Nayar said.

The RBI in its policy review last week kept interest rates unchanged and said it sees upside risk to inflation. The apex bank projected retail inflation to moderate in the October-March period.

Retail inflation was 6.93 percent in July, against 6.23 percent in June.

"Overall, we expect WPI to print in a disinflation of 0.8-1.0 percent in FY 2021, driven by the correction in prices of various commodities other than gold. Today's WPI print does not materially alter our view that an extended pause is likely from the Monetary Policy Committee," Nayar said.