July wholesale price index falls less than expected on food prices

The wholesale price index fell 1.36 per cent year-on-year in July, but the decline was smaller than expected because of higher prices for food and some commodities. Economists polled by Reuters had estimated the wholesale price index for July would fall 2.70 per cent. It fell 4.12 per cent in June.

In July, fuel and power prices fell 12.79 per cent from a year earlier, compared with a fall of 12.63 per cent in June, and prices of primary articles rose 7.57 per cent versus a fall of 2.87 per cent. Food prices sharply rose 7.75 per cent year-on-year, compared with a fall of 1.24 per cent in June, and manufactured product prices fell 2.51 per cent in July, against a 2.71 per cent fall the previous month.

Inflation in Asia's third-largest economy has started to accelerate after showing signs of easing in the first few months of the year. According to a Reuters poll of economists, India's retail inflation is likely to accelerate to 6.40 per cent in July on surging food prices, breaching the upper end of the Reserve Bank of India's (RBI) 2 per cent-6 per cent tolerance band for the first time in five months.

The data will be released later in the day. Last week, the RBI held its key lending rate steady as expected but moved to reduce the amount of cash in the banking system as inflation concerns resurfaced following higher-than-usual seasonal spikes in food prices.

"Despite a favourable statistical base, the deflation of WPI has rapidly declined in July 2023 on account of a sharp sequential pick up in food prices, especially vegetable prices," said Rupa Rege Nitsure, group chief economist at L&T Finance. That vindicates the RBI's move to extend the "pause" and watch the situation carefully, she added.