Inflation cheer continues as WPI inflation cools off in July to 5.09% after CPI inflation dip

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Updated: August 14, 2018 12:47:29 PM

The inflation data cheer continued on Tuesday, as WPI inflation (Wholesale Price Index) dipped to 5.09% in July, cooling off from 4 and-a-half highs in June.

Notably, in June, high food and fuel prices drove India’s wholesale inflation to a four-and-a-half-year high.

The inflation data cheer continued on Tuesday, as WPI inflation (Wholesale Price Index) dipped to 5.09% in July, cooling off from 4-year highs in June. Notably, in June, high food and fuel prices drove India’s wholesale inflation to a four-and-a-half-year high, leading India’s apex bank RBI to hike interest rates to tame inflation fears. Inflation measured by the Wholesale Price Index (WPI) in June accelerated sharply from 4.43% in May and 0.9% in June 2017.

In the latest month of July, Wholesale Price Index went down by 0.86% versus 1.56% in the previous month of June. However, as per government data, the fuel price index in the WPI index went up by 18.1% in July, versus 16.18% in the previous month of June. The manufacturing inflation has posted a marginal rise to 4.26% from 4.17% in the previous month.  In July, onion inflation rose to 38.82% versus 18.25% in the previous month. July pulses inflation increased a bit to -17.03% versus -20.23% while vegetables inflation came in at -14.07% Vs 8.12% in June.

“As expected, a favourable base effect for primary food items and minerals, dampened the WPI inflation to 5.1% in July 2018 from 5.8% in June 2018, mirroring the extent of the correction displayed by the CPI inflation print. However, primary non food articles, fuel and power and manufactured products recorded a rise in the YoY inflation in July 2018 relative to the previous month, in line with the trend in prices of certain commodities,” Aditi Nayar, Vice President, Principal Economist at ICRA said in a note. 

According to the expert, contagion related to the crisis in Turkey has seeped into other emerging market currencies, causing the Indian Rupee to depreciate as well. “Factors such as broader emerging market currency movement, dollar strength, and the trend in crude oil prices will drive the outlook for the INR in the immediate term, which will have an impact on the landed cost of imports as well as various commodity prices, thereby transmitting into the WPI inflation,” Nayar pointed out. 

Yesterday, the consumer inflation plunged to 4.17% in July as against 4.9% the previous month supported by dip in food prices, data from Central Statistics Office showed. Earlier, the Asian Development Bank (ADB) had hiked its inflation projection for India to 5% from 4.6% for this fiscal, citing higher crude oil prices, a depreciating rupee and an increase in minimum support prices for crops.

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