Wholesale Price Index (WPI) dropped to 13.9 per cent in July from 15.2 per cent last month as it continues to be in the double digits for 16 successive months.

Last week, National Statistical Office had said that retail inflation based on Consumer Price Index (CPI) slipped to a five month low of 6.7 per cent in July, as against 7 per cent in June. Although rate review is primarily done on the basis of retail inflation, as both the inflation rates are still very high, the expectation is that the Monetary Policy Committee will go for another round of rate hikes, when it meets in october.

Talking about the double digit wholesale inflation, Office of the Economic Advisor in the Department for Promotion of Industry and Internal Trade said in a note that, inflation in July is primarily contributed by the rise in prices of mineral oils, food articles, crude petroleum & natural gas, basic metals, electricity, chemicals & chemical products, and food products compared to the corresponding month of the previous year.

Easing inflation

Inflation in food articles in July eased to 10.77 per cent from 14.39 per cent in June. The rate of price rise in vegetables declined substantially to 18.25 per cent in July against 56.75 per cent in the previous month. In the fuel and power basket, inflation was 43.75 per cent in July compared to 40.38 per cent in the last month. Inflation in manufactured products and oil seeds was 8.16 per cent and (-) 4.06 per cent, respectively.

Commenting on the latest number, Aditi Nayar, Chief Economist with ICRA said the correction in global commodity prices is expected to translate rapidly into lower WPI inflation. “We expect the WPI inflation to ease to 12-13 per cent in August 2022 and average at 13 per cent in Q2 FY2023, lower than the 15.7 per cent seen in Q1 FY2023. We see a likelihood of the first single digit WPI inflation print,” she said.

DRE Reddy, CEO and Managing Partner of CRCL LLP, says, wholesale inflation level has softened a bit if compared month on month basis, but it has remained in double digits. Higher crude oil prices and input costs still weigh on the producers, and pass-through has resulted in pushing the retail inflation higher. This move also implies that manufacturers are recovering their pricing power. “The global economy is recovering as we witness an increase in demand for metals, oils, crude and fertilizers. Moving forward, as the crude prices soften in the summer and supply issues getting resolved will help ease WPI inflation in the next few months,” he said.

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