Inflation rises after three months

New Delhi: Wholesale and retail inflation accelerated sharply in July as food prices soared but is still below RBI comfort level.

Wholesale rose to 1.88 per cent in July — first rise in five months — and retail inflation jumped to 2.36 per cent in July after easing for three straight months.

“Both WPI and CPI inch up in July at 1.88 per cent and 2.4 per cent year on year. But, still below the comfort level of 4 per cent,” said Subhash Chandra Garg, economic affairs secretary.   

Industry too demanded a cut in interest rates by RBI due to subdued inflation below the Central Bank’s  comfort level.

“Given the trend and outlook for inflation, we see clear space for a more accommodative stance in the monetary policy. This is all the more important given the state of industrial sector where growth is anaemic,” said Pankaj Patel, president, FICCI.

Inflation based on the Wholesale Price Index was 0.90 per cent in June 2017 and 0.63 per cent in July 2016.

Food articles, which were witnessing deflation for the previous two months, saw inflation go up to 2.15 per cent in July on a yearly basis, the official data released on Monday showed.

Vegetable prices, which had witnessed a 21.16 per cent contraction in June, too shot up 21.95 per cent in July. However, manufactured products saw a slight fall in inflation at 2.18 per cent in July, compared to 2.27 per cent in June.

Retail inflation jumped to 2.36 per cent in July from 1.46 per cent for June. Food inflation, however, saw deflationary pressure at (-) 0.29 per cent in July compared to (-)2.12 per cent in June this year. The price of sugar and confectionery items went up by 8.27 per cent in July while pan, tobacco and intoxicants turned dearer by 6.39 per cent. The major contraction in price was witnessed in pulses and products at (-)24.75 per cent, followed by vegetables (-)3.57 per cent, eggs (-)2.04 per cent and spices (-)1.67 per cent. In rural areas, the reading for July was 2.41 per cent while it stood at 2.17 per cent in cities as against 1.52 per cent and 1.41 per cent, respectively, in June.

“As expected, the CPI inflation rebounded to 2.4  per cent in July 2017 from the series low of 1.5 per cent in June 2017, on account of rising vegetable prices, the revision in HRA and, to some extent, higher GST  on various services,” said Aditi Nayar, principal economist, Icra.

Moreover, core CPI inflation recorded a marginal uptick to 4 per cent in July 2017 from 3.9 per cent in the previous month.

“While the volume of monsoon rainfall is near-normal, its uneven geographic spread poses a concern, particularly the substantial 16 per cent  shortfall in precipitation in the South Peninsula. The YoY decline in sowing of various oilseeds (-9.9 per cent), pulses (-1.6 per cent) and coarse cereals (-1.5 per cent), may affect their prices and exert some upward pressure on inflation in the coming months,” said Ms Nayar.