Sequentially higher food prices accelerated India's annual rate of inflation based on wholesale prices to (-) 0.58 per cent in July from (-) 1.81 per cent in June, official data showed on Friday.
However, on a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry showed a decelerating trend during July 2020, as inflation had risen to 1.17 per cent during the corresponding period of the previous year.
"The annual rate of inflation, based on monthly WPI, stood at (-0.58 per cent)(Provisional) for the month of July, 2020 (over July, 2019) as compared to (1.17 per cent) in the corresponding period of the previous year," the Ministry said in its review of 'Index Numbers of Wholesale Price in India' for July.
"The WPI for July, 2020 have been compiled at a response rate of 69 per cent , while the final figure for May, 2020 is based on the response rate of 86 per cent. These provisional figures of WPI will undergo revision as per the final revision policy of WPI."
On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, increased 0.63 per cent from (-) 1 .21 per cent in June 2020.
Furthermore, the prices of food items increased at a faster rate of 4.32 per cent from 3.05 per cent.
On Thursday, another set of data showed that a substantial rise in food prices lifted India's July retail inflation to 6.93 per cent from 6.23 per cent in June.
On a year-on-year (YoY) basis, the CPI inflation more than doubled last month from 3.15 per cent recorded during July 2019.
Commenting on July's wholesale inflation, Aditi Nayar, Principal Economist, ICRA said: "The considerable narrowing in the WPI disinflation in July 2020 relative to the previous month, was along expected lines, with a correction in the index levels for crude oil and mineral oils, further narrowing of the core disinflation and a rise in food inflation to a moderate level."
"The surge in tomato prices and moderate rise in potato prices pushed up the vegetable inflation in July 2020, contributing to the uptick in the inflation for primary food articles to a four month high. While the inflation for pulses remained steady in double-digits, cereal inflation eased appreciably, to a mild 0.7 per cent in July 2020, offering a modicum of relief.a
According to Sunil Kumar Sinha, Principal Economist and Director - Public Finance, India Ratings & Research: "One of the key reasons for subdued wholesale inflation is the depressed prices of manufactured items. Manufactured items have 64.2 per cent weight in the wholesale price index. The average inflation witnessed in the manufactured items during the past twelve months is (-) 0.1 per cent due to the weak demand conditions in the economy.
"Although, the Covid-19 related countrywide lockdown was lifted in the month of June, partial or local or regional lockdown are still continuing thereby impacting the full demand and economic recovery. India Ratings and Research believes this in turn will keep the pricing power of the producers under check even going forward."