WPI inflation at 11.16% in Jul as prices ease
NEW DELHI: India’s wholesale price index (Wpi)-based inflation eased in July but remained in double digits for the fourth consecutive month, as fuel and food inflation moderated even as inflation of manufactured items picked up.
Wpi-based inflation fell to 11.16% in July from 12.07% a month ago as food inflation was eliminated (0%) and fuel inflation eased to 26%, according to data released by the industry department. However, inflation for manufactured items rose to 11.2% in July from 10.88% a month ago, signalling that manufacturers were regaining pricing power with economic recovery gathering momentum. Core inflation continued to rise, touching 10.8% in July from 10.4% a month ago.
Wholesale price inflation cooled for the second month in a row benefitting from a favourable base effect and a softening of food price pressures, said Aditi Nayar, chief economist, ICRA Ltd. “The headline WPI inflation is expected to remain in double-digits until October 2021 and, therefore, its softening over the last two months is unlikely to provide material comfort to the monetary policy committee,” she said.
Elevated core WPI inflation implies that cost push pressures are gradually seeping into prices of manufactured goods, said Gaura Sengupta, India economist at IDFC First Bank. “We expect demand pull pressures to be more visible in the second half of FY22 as vaccination coverage improves and restrictions are eased further. Hence, core consumer price index(cpi)-based inflation is expected to remain elevated, averaging 6%+ in FY22. Meanwhile, headline CPI inflation is expected to average 5.7% in FY22, with moderate food inflation countering some of the upside pressure from core,” she said.
Retail inflation had also eased to 5.59% in July from 6.26% a month ago, bringing some relief to the government and the Reserve Bank of India (RBI). The central bank on Friday kept interest rates on hold for the seventh straight time to support the economy reeling from the pandemic even as a split appeared among monetary policy committee (MPC) members over retaining the easymoney policy amid an inflation surge. The MPC kept the repo rate, or the rate at which banks borrow from RBI, unchanged at 4%.