Data released by the commerce and industry ministry on Tuesday showed inflation, as measured by the Wholesale Price Index (WPI), rose an annual 13. 9% in July, lower than the 15. 2% in the previous month. The inflation rate was at 11. 6% in July 2021. Inflation in July, 2022 is primarily contributed by rise in prices of mineral oils, food articles, crude petroleum and natural gas, basic metals, electricity, chemicals & chemical products, and food products as compared to the corresponding month of the previous year, according to the official statement. The May inflation number was revised to 16. 6% from the earlier 15. 9%.
The data showed food inflation dipping to single digits in July while core inflation (minus food and fuel) slowed to 8. 4% — a 16-month low. Vegetable prices cooled amid fresh supplies with tomato prices falling sharply. Potato prices remained stubborn, rising 53. 5%. Inflation in fruit rose 29. 4%. Edible oil prices, which had soared due to supply constraints, have cooled sharply as government measures to rein in prices helped. Fears of a global slowdown have softened commodity prices, which is having a cooling impact on domestic prices.
Last week, data showed retail inflation moderated to a five-month low in July on the back of easing of food prices, bringing much needed relief for policymakers battling price pressures. But the overall number still remained above the Reserve Bank of India’s (RBI’s) upper tolerance level for the seventh consecutive month. The central bank has raised interest rates sharply to tame price pressures. Globally, inflation has emerged as a major policy challenge, which has prompted central banks to sharply hike interest rates to rein in prices.
“The correction in global commodity prices is expected to translate rapidly into lower WPI inflation. We expect the WPI inflation to ease to ~1213% in August 2022 and average at ~13% in Q2 FY2023, lower than the 15. 7% seen in Q1 FY2023. We see a likelihood of the first single-digit WPI inflation print by October 2022, after a gap of 18 months, if the downtrend in commodity prices sustains,” ratings agency ICRA said in a note.