WPI inflation hits 23-month high of 3.55%
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India’s wholesale price inflation shot up to 3.55% in July from 1.62% a month ago on the back of rising prices of food and non-food articles said a report in the Mint.
During the month, food inflation picked up 11.82% from 8.18% a month ago while inflation for non-food articles rose 9.49% in July against 5.72% in the previous month.
While higher prices of cereals, rice, fruits and pulses led to increase in food inflation, non-food inflation was driven mainly by fibres and oil seeds.
Fuel inflation remained negative at -1% in July due to fall in crude oil prices compared to its level a year ago. Inflation of manufactured items picked up marginally to 1.82% in July from 1.17% a month ago.
Retail inflation in July touched a 23-month high at 6.07%, breaching the Reserve Bank of India’s tolerance level of 6%.
In his last monetary policy review last week, RBI governor Raghuram Rajan left key policy rates unchanged, flagging upside risks to the inflation target.
However, analysts expect food inflation to subside in coming months owing to good monsoon. Boosted by ample rains across the country, planting of rain-fed kharif crops have been completed in 95.4 million hectares, 7% more than the area usually planted by this time of the year, according to data released by the agriculture ministry on Friday.
Data from the India Meteorological Department (IMD) showed that the rainfall recorded till Friday in the ongoing June-to-September south-west monsoon season is in excess of normal by 3%. About 93% of the country has received normal-to-excess rainfall so far.
RBI, in its monetary policy statement, said the strong improvement in sowing on the back of the monsoon’s steady progress, along with supply management measures, augur well for food price inflation to ease.
“The prospects for inflation excluding food and fuel are more uncertain; if the current softness in crude (oil) prices proves to be transient and as the output gap continues to close, inflation excluding food and fuel may likely trend upwards and counterbalance the benefit of the expected easing of food inflation,” RBI warned.
In addition, the full implementation of the recommendations of the Seventh Central Pay Commission in terms of payment of allowances will affect the magnitude of the impact house rents have on CPI, it said.
