Wholesale inflation eases to 2% in July

Sequentially, however, prices were 0.84 percent in July compared with the previosu month, as food prices rose 2.7 percent.

Manufactured products, which account for nearly two-thirds of the index, witnessed prices decline 0.14 percent sequentially.

Over the year, inflation in manufactured goods was highest in 17 months.

"Wholesale core inflation jumped to a 17-month high of 1.2 percent in July 2024. Nevertheless, the core inflation is still benign as only eight out of the 21 industries have higher inflation than the core segment. This would continue to help the corporates in maintaining their margins (by keeping their input prices under check) as is reflected in the incoming results for 1QFY25," said Paras Jasrai, senior analyst, India Ratings and Research.

Food concerns remain

Despite significant reduction in primary products inflation, food items witnessed an increase in inflation across major categories.

Cereals inflation rose to 9 percent in July compared with 8.3 percent in the previous month, paddy inflation rose to 11 percent.

On the other hand, pulses inflation doubled to 20.3 percent from 9.6 percent in the previous month. Potato and onion high double digit inflation at 76 percent and 88 percent respectively, while fruits inflation rose to 15.6 percent from a 9.9 percent deflation in the previous month.

The decline in wholesale price index follows the more significant decline in consumer price index below 4 percent for the first time in nearly five years. Data released on August 12 showed that consumer inflation dipped to 3.5 percent compared with 5.1 percent in the previous month, as a high base helped keep inflation contained.

Sequentially, however, prices had risen 1.4 percent in July, with food prices increasing 2.8 percent over the month.

Economists have shifted their rate cut outlook further. The Reserve Bank of India’s Monetary Policy Committee kept the policy rate unchanged at 6.5 percent for the ninth consecutive time at its review meeting in August.

Economists contend that the chances of a rate cut in October also look bleak. Some even contend that a rate cut may come in 2025.

"External risks emerging from ongoing geopolitical tensions need to be monitored, given the risk they can pose to supply chains and commodity prices. Looking ahead, the favourable base effect for WPI inflation is expected to persist in August before reversing in September. For FY25, we expect inflation to average ~3 percent," said Rajani Sinha, chief economist, CareEdge.