Coming as a clear signal of a reduction in economic pressure spikes, wholesale inflation in India eased significantly during July and remained consistent with the recent drop in retail inflation.
Moreover, the provisional All India WPI-based annual rate of inflation remained at 2.04 percent for July 2024 compared to that of July 2023. This is the ninth month of wholesale inflation staying in the positive zone; it was in the negative zone for seven months up to October last year. Most economists agree that a small rise in wholesale inflation is good for the economy, as it may spur producers to produce more.
While against this, the food index with a 24.38 percent share in WPI, reflected a decline in wholesale inflation rate to 3.55 percent in July from 8.68 percent in June. Prices of ‘food article’, ‘food products manufacturing’, ‘crude petroleum and natural gas’, and ‘other manufacturing groups’ were higher and pushed up wholesale inflation in the previous month.
The numbers of the WPI index get published every month on the 14th or next working day by the Government, and data is procured from institutional sources and selected manufacturing units all over the country. Like what had happened in the initial days of COVID-19 during July 2020, last April witnessed Wholesale Inflation slipping into negative territory.
Wholesale price inflation has been in double figures and unabated for the 18th consecutive month till September 2022. It cooled briefly to 8.39 % in October 2022.
Retail inflation has also softened considerably in India. States that were off the 5 percent mark in June dropped further to 3.54 percent in July—the lowest in the past 59 months. This is a deceleration from a rise of 5.08 percent in June, which was triggered by a sharp rise in food prices.
The CFPI is now located at 5.42 percent on a y-o-y basis in July 2024. Its constituents are rural-urban food inflation rates, which went to 5.89 percent and 4.63 percent, respectively. Indeed, although food prices took a huge spurt earlier this year, the July data reflects a decline and gives a sense of a policy target that the government is sticking to keeping general retail inflation around 4 percent on a sustainable basis.
How India managed the current wave of inflation has differed from most other countries, including advanced economies. The latest fall in retail inflation comes against the backdrop when the Reserve Bank of India has kept the repo rate unchanged for the ninth time in a row. The central bank had cumulatively hiked the repo rate by 250 basis points since May 2022 in a bid to quell the inflationary pressures. What may thus emerge as the most potent tool for taming economic demand and warding off inflation—the rate by any of its myriad names—is simply something as straightforward as the rate of interest at which the RBI lends to other banks.
ANI
