India’s wholesale inflation falls to 2.04% in July amid falling retail inflation

New Delhi (India), August 14 (ANI): With retail inflation declining, wholesale inflation in India also fell sharply in July.

The annual inflation rate based on the all-India Wholesale Price Index (WPI) is 2.04 per cent (provisional) in July 2024 (versus July 2023).

It remains in positive territory for a ninth month after being in negative territory for seven months through October. Economists often say that a small increase in wholesale inflation is a good thing because it usually motivates producers of goods to produce more.

In the case of the food price index, which has a share of 24.38%, the wholesale inflation rate decreased from 8.68% in June 2024 to 3.55% in July.

The increase last month was mainly due to price increases across categories, including food products, food manufacturing, crude oil and natural gas, mineral oils and other manufacturing sectors.

The government publishes wholesale price indices monthly on the 14th of each month (or the next business day). The indices are compiled based on data received from institutional sources and selected production units across the country.

In April last year, wholesale inflation turned negative. Similarly, in the early days of COVID-19, in July 2020, WPI was negative.

Overall wholesale inflation stood at 8.39 percent in October 2022 and has been declining since then. Interestingly, inflation based on the wholesale price index (WPI) was in double digits for 18 months in a row till September 2022.

Meanwhile, retail inflation in India, after crossing 5% in June, has slowed dramatically in July. According to data released by the Ministry of Statistics and Programme Implementation, retail inflation or the consumer price index in July stood at 3.54%, the lowest in the last 59 months.

In June, this indicator departed from the moderate trend of previous months and rose to 5.08%, which was caused by an increase in food prices.

Food price inflation in July 2024 was the lowest since June 2023. The annual inflation rate based on the All India Consumer Food Price Index (CFPI) is 5.42 per cent (provisional) for July 2024. The corresponding inflation rate for rural and urban areas is 5.89 per cent and 4.63 per cent, respectively.

Rising food prices continue to weigh on Indian consumers, with food inflation almost doubling year-on-year in June.

Food prices remain a sticking point for Indian policymakers as they seek to keep retail inflation at 4 percent. However, the latest retail inflation data showed that overall inflation is in line with the target.

Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer the inflation trajectory quite well. The moderate monthly retail inflation, except for June, came just after the RBI kept the repo rate on hold for the ninth consecutive session.

Barring the recent hiatuses, the RBI has raised the repo rate by a cumulative 250 basis points since May 2022 in a bid to combat inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping bring down the inflation rate. The repo rate is the interest rate at which the RBI lends to other banks. (ANI)