India’s wholesale inflation rate grew by 5.19% in July, its slowest pace in five months, but high food prices, particularly potatoes and fruits, remain a key concern, latest price data released on Thursday showed.
The moderation in wholesale inflation rate is also largely attributed to the moderation in fuel prices. Fuel and power inflation moderated to 7.40% in July compared to 9.04% in June.
Besides, high retail inflation — a realistic gauge that the Reserve Bank of India (RBI) tracks as it measures shop-end prices consumers pay — would mean that the RBI was likely keep interest rates high to cool prices.
Retail inflation measured by the consumer price index rose to 7.96% in July from 7.46% in June, data released earlier this week showed. The 5.19% growth in the wholesale price index in July was the lowest since February’s 5.03% and lower than June’s 5.43%, but analysts cautioned that inflation may be stickier than the price data suggests.
Poor rains in some parts of the country have pushed up food and vegetable prices, which have grown 68% since March.
“This decline in (wholesale) inflation needs to be viewed with caution in the ensuing months as inflationary pressures continue to emerge from rising food prices owing to subnormal monsoons in the current the year,” credit ratings and research firm CARE ratings said in a research report.
Wholesale potato prices grew 46.41% in July, compared to 42.52% in June, while wholesale prices of fruits grew 31.71% compared to 21.40% in June.
Importantly, manufactured products’ inflation grew 3.67% in July, compared to 3.61% in June.
Analysts expect retail inflation to remain around 8% in the coming months. “Given the recovery in rainfall and measures taken by the government, we expect CPI inflation to hover around 7.5 – 8.0% ,” Crisil, a credit rating and research firm, said in a recent report.
Meanwhile, after registering double-digit growth for two straight months, India’s exports grew by 7.33% to $27.72 billion in July, while imports rose by 4.25% to $39.95 billion. Trade deficit marginally narrowed down to $12.22 billion during the month under review from $12.49 billion, according to commerce ministry data.