Wholesale Inflation Eases To 25-Month Low Of 1.08% In July

Wholesale inflation eased to a 25-month low of 1.08 per cent in July, from 2.02 per cent in the previous month, government data showed on Wednesday. A fall in fuel product prices helped cool off wholesale inflation - or the rate of increase in wholesale prices determined by the Wholesale Price Index (WPI). The reading for the month of July was also lower than economists' expectations. Economists in a poll by news agency Reuters had forecast wholesale price inflation at 1.93 per cent in July.

Wholesale food prices in July rose 4.54 per cent on a year-on-year basis, as against 5.04 per cent in the previous month, the data showed.

“Although a thaw in trade tensions has led to a rally in crude oil prices in the recent sessions, the subdued global growth outlook and the risks related to the resurgence of trade wars are likely to outweigh geopolitical concerns, preventing a sharp resurgence in prices,” said Aditi Nayar, principal economist, ICRA.

"The WPI inflation is expected to remain muted in the near term, reflecting the continued softness in commodity prices, although a weaker currency may arrest the correction in the landed price of imports," she added. 

Separate official data on Tuesday showed consumer inflation (gauged by the Consumer Price Index) eased to 3.15 per cent last month, from 3.18 per cent in June.

The Reserve Bank of India (RBI) tracks consumer inflation data primarily for formulating its monetary policy.

The central bank has so far this year reduced the repo rate by 110 basis points (1.1 percentage point) in four consecutive bi-monthly policy reviews. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks.

In its August 7 statement, the RBI's six-member Monetary Policy Committee lowered its GDP or gross domestic product growth projection to 6.9 per cent for 2019-20, from 7 per cent in June.

(With inputs from Reuters)