Easing prices of food products, primary articles sequentially decelerated India's July 2021 wholesale inflation.
Accordingly, the annual rate of inflation, based on wholesale prices, rose to 11.16 per cent last month from 12.07 per cent in June.
However, on a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen exponentially over July 2020.
The inflation rate had stood at (-)0.25 per cent in July 2020.
"The annual rate of inflation is 11.16 per cent (Provisional) for the month of July, 2021 (over July, 2020) as compared to ((-)0.25 per cent) in July, 2020. The high rate of inflation in July 2021 is primarily due to low base effect and rise in prices of crude petroleum and natural gas; mineral oils; manufactured products like basic metals; food products; textiles; chemicals and chemical products, etc. as compared to the corresponding month of the previous year," the ministry said in its review of 'Index Numbers the of Wholesale Price in India' for July.
On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, increased at a slower rate of 5.72 per cent than 7.74 per cent in June 2021.
Similarly, the prices of food items rose at a slower rate at 4.46 per cent from 6.66 per cent reported for June.
On a YoY basis, the cost of the fuel and power category rose by 26.02 per cent against a rise of (-)9.84 per cent YoY.
Furthermore, the cost of the manufactured products category rose 11.20 per cent against 0.59 per cent YoY.
D.R.E Reddy, CEO, CRCL LLP said, “WPI inflation for the month of July has eased MoM to 11.16 percent. It is on expected lines as the supply side issues are getting addressed due to ease in lockdown. The ease in WPI is in tandem with the falling CPI. Falling inflation is in line with the guidance provided by the central bank and this complements RBI's monetary policy stand. High inflation is transient and expected to ease further as progress with a good monsoon year.
"The rise in the number of total vaccination is expected to normalize the overall situation, unlocking for normal business activities. The WPI inflation is expected to ease to a single digit by the end of FY22 with CPI well within the RBI mandated 2-6 percent band,” he added.
Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry, said, "Although WPI inflation is decelerating month after month, the build-up of WPI inflation in manufactured products from 10.9 percent in June 2021 to 11.2 percentin July 2021 is worrying as it is impacting the cost of production and reducing price-cost margin of the producers."
High prices of raw materials are posing a serious challenge to the small businesses to operate in the difficult pandemic times, which needs to be addressed immediately, said Sanjay Aggarwal.
ICRA Chief Economist Aditi Nayar said the core-inflation is likely to have peaked at 10.8 per cent in July 2021.
The rapid rise in the core-WPI inflation from August 2020 onwards as well as the impact of concerns related to the Delta plus variant on commodity prices are likely to gradually soften the core print going ahead, she said.
"The headline WPI inflation is expected to remain in double-digits until October 2021, and therefore its softening over the last two months is unlikely to provide any material comfort to the monetary policy committee," Nayar added.
The RBI, which mainly takes into account retail inflation, in its monetary policy last week kept interest rates unchanged at record lows. It projected CPI or retail inflation at 5.7 per cent during 2021-22, up from its earlier projection of 5.1 per cent.
Data released last week showed retail inflation eased to 5.59 per cent in July, mainly due to softening food prices.
--With IANS, PTI inputs
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