The Wholesale Price Index or WPI-based inflation accelerated to 23-month high of 3.55 per cent in July from 1.62 per cent in June. The rising of WPI inflation was mainly because of soaring price of food items, such as potato, pulses, vegetables, cereals among others, which crossed double digit mark at 11.82 per cent in the same month. All items, barring onion, in the basket showed a rising price pressure, according to the Government data which was released on Tuesday.
As per industry speculation, rising WPI inflation may spill over to the retail level, based on the Consumer Price Index (CPI), and make it difficult for the central bank as well the Government to contain CPI-inflation at the upper target level of 6 per cent. The Commerce Ministry data, however, showed that inflation in the overall food basket breached the double digit mark at 11.82 per cent in July.
The whole sale inflation in June stood at 1.62 per cent. It was (-) 4.00 per cent in July last year. The earlier high in WPI inflation was recorded at 3.74 per cent in August 2014.
“WPI inflation in potato shot up 58.78 per cent, pulses (35.76 pc), vegetables (28.05 pc) and cereals (7.03 pc). Among others, the rate of inflation in sugar was at 32.33 per cent and that for fruits rose by 17.30 per cent during the month,” said the data.
“Emerging trends regarding the ongoing kharif sowing suggest an imminent cooling of food inflation in the coming months,” Aditi Nayar, Senior Economist at ICRA limited said.
The WPI inflation, which was in the negative zone from November 2014 to March 2016, turned positive since April. The spike in WPI follows that of retail or CPI inflation, which too hit a 23-month high of 6.07 per cent -- well above the RBI’s comfortable level.
While another rating agency CARE Ratings said, “We do expect these numbers to come down once the monsoon impact on kharif output is clear. With both WPI and CPI inflation coming in higher, a rate action may not be expected for some time.”