In July, the Wholesale Price Index (WPI) continued to exhibit deflationary trends for the fourth consecutive month, although the decline was notably mitigated by a substantial increase in food and primary article prices. While the overall WPI deflation shrank from June’s 92-month low of -4.1% to -1.36%, a surge of over 7.5% in food and primary article prices played a pivotal role in this shift.
Food and Primary Article Inflation Surges:
Primary food article inflation reached an impressive 14.3% in July, marking its highest level in nearly a decade. The surge in vegetable prices was particularly striking, with an 81.1% spike compared to June and a 62.1% increase from the previous year. Other staples like milk, wheat, cereals, pulses, and paddy saw year-on-year price hikes of over 8% to 9%.
Mixed Trends Within Food Category:
While several food items experienced substantial price escalations, potatoes and fruits saw declines of 24.4% and 8.9%, respectively, in comparison to last July. However, the price of potatoes did increase by 8% from June. Onions, too, witnessed a notable price increase of nearly 28% since June 2023 and 7.13% from July 2022.
Edible Oils Bring Relief, Other Sectors Remain Sticky:
Edible oil prices presented a rare silver lining for consumers as they dropped by 16.9% in July. Nonetheless, expenses related to personal care and effects exhibited a stubborn increase of 9%, and healthcare inflation remained nearly unchanged at 6.2% compared to June.
Future Outlook and Expert Analysis:
Economists, including Aditi Nayar from ICRA, have expressed cautious optimism about the coming months. While the shock caused by surging vegetable prices might not completely reverse before the next harvest, the deficiency in August’s rainfall could apply upward pressure on food prices. This concern is further exacerbated by delays in kharif sowing across certain crops.
WPI Movement and Composition:
The Wholesale Price Index ascended by approximately 2% from June’s figures, largely due to primary food articles witnessing an increase of over 8%, and the Food Index registering a notable uptick of 7.1%. In contrast, manufactured product prices decreased by 2.5%, and fuel and power prices fell by a substantial 12.8% year-on-year. Sequentially, the deflation rates for these two segments were relatively mild, at 0.3% and 0.5%, respectively.