WPI inflation offers a breather; eases to a 5-month low in July

Aug 14 2014, 18:29 IST
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Inflation eases to 5.19 per cent in July as against 5.43 per cent in June. Inflation eases to 5.19 per cent in July as against 5.43 per cent in June.
SummaryIn June, wholesale prices rose 5.43 per cent year-on-year, their slowest pace in 4 months.
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Even as retail inflation for June recorded a worrying surge, the wholesale price index (WPI)-based inflation dipped to a five-month low of 5.19 per cent in July. The year-on-year headline WPI reading was 5.43 per cent in the previous month. 

Inflation had stood at 5.85 per cent in July, 2013. 

The consumer price index (CPI) inflation data for July, released earlier this week, had surged to 7.96 per cent as against 7.46 per cent in June. 

The dip in the WPI inflation in July, which was released by the government on Thursday, was despite food inflation rising to 8.43 per cent in July from 8.14 per cent in June. 

The divergent movements of the CPI and WPI readings is largely on account of the higher weightage of food items in CPI-based inflation as against the WPI -- food items constitute over 45 per cent weight in CPI, their weight in WPI is just 14.34 per cent. 

Inflation in vegetables declined 1.27 per cent, and for onion it was (-)8.13 per cent on an annual basis in July, as per the WPI data. However, potato prices surged 46.41 per cent and fruits 31.71 per cent during the month. Rate of inflation in milk was 10.46 per cent.

Inflation in the egg, meat and fish category stood at 2.71 per cent in July as against 10.27 per cent in the previous month.

Inflation in the manufactured products was at 3.67 per cent, and non-food articles, which include fibre, oil seeds and minerals, at 3.32 per cent. Inflation in the fuel and power category, meanwhile, was down at 7.40 per cent from the previous month.

The WPI inflation data was revised upwards for May to 6.18 per cent, from 6.01 per cent as per provisional estimates.

REACTIONS

“Even after factoring in the price rise of vegetables, the impact on the WPI inflation was much lesser than it was for the CPI. This is because the key item of the price inflation in vegetables for July, namely tomatoes, was not a part of the accounting under WPI for July. This is because the WPI follows a seasonal based approach in pricing of seasonal crops – such as mangoes, peas, tomatoes etc. where the price quote is available only in the period when the fresh crops arrive in the markets and not during the sowing season of these crops. With the importance of the WPI going down for policy making purposes, we do not expect

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