India's wholesale inflation eased to 2.04% in July, reflecting a downward trend in retail inflation as well.

New Delhi [India], August 14 : Alongside the reduction in retail inflation, India has also seen a significant drop in wholesale inflation for the month of July.

The provisional annual inflation rate based on the all India Wholesale Price Index (WPI) stood at 2.04 percent for July 2024 (compared to July 2023).

This marks the ninth consecutive month of positive wholesale inflation following seven months of negative inflation until October. Economists often suggest that a modest rise in wholesale inflation can be beneficial, as it generally encourages goods manufacturers to increase production.

For the food index, which holds a 24.38 percent weightage, the wholesale inflation rate dropped from 8.68 percent in June 2024 to 3.55 percent in July.

The increase in wholesale inflation last month was primarily driven by higher prices in several categories, including food articles, manufacturing of food products, crude petroleum and natural gas, mineral oils, and other manufacturing sectors.

The government publishes wholesale price index numbers on the 14th of every month (or the following working day), based on data collected from institutional sources and selected manufacturing units across the country.

In April of last year, wholesale inflation turned negative, similar to what occurred during the early days of COVID-19 in July 2020.

Overall, wholesale inflation was recorded at 8.39 percent in October 2022 and has been declining since then. Notably, WPI-based inflation had remained in double digits for 18 consecutive months until September 2022.

Meanwhile, India's retail inflation, which exceeded 5 percent in June, saw a sharp decrease in July. Data from the Ministry of Statistics and Programme Implementation indicated that retail inflation, or the Consumer Price Index, was at 3.54 percent in July, the lowest in the past 59 months.

In June, retail inflation, after showing moderation in previous months, increased to 5.08 percent due to rising food prices.

Food inflation for July 2024 is the lowest since June 2023. The year-on-year inflation rate based on the All India Consumer Food Price Index (CFPI) was provisionally 5.42 percent for July 2024. The corresponding inflation rates for rural and urban areas were 5.89 percent and 4.63 percent, respectively.

Rising food prices have remained a persistent challenge for Indian consumers, with the inflation rate in the food segment nearly doubling year-on-year in June.

Food prices continue to be a concern for policymakers in India, who aim to bring retail inflation down to 4 percent on a sustainable basis. However, the latest retail inflation data indicate that overall inflation is now aligned with this target.

Inflation has been a significant concern globally, including in advanced economies, but India has largely managed to navigate its inflation path effectively. The easing of month-on-month retail inflation, except for June, follows the Reserve Bank of India (RBI) maintaining the repo rate at its current level for the ninth consecutive time.

Apart from the recent pauses, the RBI has raised the repo rate by a cumulative 250 basis points since May 2022 as part of its efforts to combat inflation. Raising interest rates is a monetary policy tool typically used to curb demand in the economy, which in turn helps reduce inflation. The repo rate is the interest rate at which the RBI lends to other banks.