WPI inflation rises to -1.36% in July as vegetable inflation shoots up to 62%

WPI inflation has been in negative territory for four months in a row now.

India's wholesale prices remained in the deflationary zone for the fourth month in a row in July, data released on August 14 by the commerce ministry showed, although the Wholesale Price Index (WPI) inflation rose to a three-month high of –1.36 percent on a mammoth rise in vegetable prices.

WPI inflation stood at -4.12 percent in June, which was the lowest in more than seven-and-a-half years.

The wholesale inflation data comes hours before the statistics ministry will release Consumer Price Index (CPI) data for July later today on August 14 at 5.30 pm, which is expected to show the headline retail inflation rate surged to a nine-month high of 6.6 percent. The divergence between WPI and CPI inflation is due to the differences in the items the two price indices contain, with the latter also including services and a higher share of food items.

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But even WPI inflation was not immune to higher food prices, as food inflation shot up to 7.75 percent in July from -1.24 percent in June. As expected, leading the charge were vegetables, whose index was a huge 81.2 percent higher in July compared to June.

To put the month-on-month increase in the vegetable index in perspective, the all-commodity index of the WPI rose 1.95 percent in July while the food index was up 7.13 percent.

Within vegetables, the index of tomatoes was up an astonishing 307 percent month-on-month.

On the whole, vegetable inflation -which measures the change in price compared to the same month last year - rose to 62.12 percent in July from -21.98 percent in June.

On the downside, the biggest month-on-month decline among food items was posted by fruits, whose index was down 6.99 percent from June.

Food items apart, prices eased in July, with the index for fuel and power down 0.48 percent from June and that of manufacturing products lower by 0.29 percent. However, the month-on-month decline in these two indices was lower compared to the numbers they posted in June.

While the government has taken multiple measures in an attempt to cool food prices, the Reserve Bank of India (RBI) has looked through the recent spike in prices and termed it as a temporary problem due to demand-supply mismatch and the weather. As such, on August 10, the central bank's Monetary Policy Committee (MPC) left the repo rate unchanged at 6.5 percent for the third meeting in a row.

However, the RBI did raise its CPI inflation forecast for 2023-24 by 30 basis points to 5.4 percent, primarily due to a big upgrade to the projection for the current quarter.