Inflation dips to 5-month low, monsoon still a concern

Inflation declined to 5-month low of 5.19 per cent in July on account of decline in vegetable prices , though the impact of poor monsoon on overall price situation continues to be a concern.

The Wholesale Price Index based inflation was at 5.43 per cent in June, and 5.84 per cent in July last year, according to the data released by government on Thursday.

Inflation in the overall food articles basket, which accounts for 14 per cent of the total WPI, stood at 8.43 per cent. It was at 8.14 per cent in June.

However, inflation in vegetables as a group declined 1.27 per cent. Onion prices fell by 8.13 per cent, year-on-year, in July. Potato prices, on the other hand, shot up 46.41 per cent and fruits by 31.71 per cent. The rate of price rise in milk was at 10.46 per cent.

Inflation for the eggs, meat and fish category stood at 2.71 per cent in July as against 10.27 per cent in the previous month.

Commenting on inflation, Ficci President Siddharth Birla said: "While risks on account of monsoon and volatility in crude oil prices have receded for the time being, some degree of ambiguity remains. Inflation continues to be a concern as prices of food articles are still elevated... It needs to be assured that the industrial growth is not stifled and recent momentum seen in IIP numbers is kept pace with."

According to the data, the rate of price rise in pulses was 3.31 per cent. It was at 4.46 per cent for cereals. For rice, it was 6.85 per cent and wheat 1.02 per cent in July.

Inflation in the manufactured products was at 3.67 per cent, and non-food articles, which include fibre, oil seeds and minerals, at 3.32 per cent.

Inflation in the fuel and power category, meanwhile, was down at 7.40 per cent from the previous month.

The WPI data was revised upwards for May to 6.18 per cent, from 6.01 per cent as per provisional estimates.

"Good to note that headline inflation has eased to a two month low in July. It is anticipated that food inflation would come down in the coming months considering that monsoons have started picking up pace and the rain deficiency has come down significantly," industry body CII said in a statement.

The recent initiatives taken by the government to contain inflation would act as a lever to tackle inflation and curb inflationary expectations, CII added.

The Reserve Bank in its monetary policy review last week had cautioned that continued uncertainty over monsoon could stoke food inflation, but expressed the hope that government policies will improve supplies in the coming months.

Consumer Price Index based retail inflation for July, in contrast to WPI, rose to 7.96 per cent over a price rise of 7.46 per cent in the previous month.

"Decline in WPI inflation to five months low is really encouraging and would pave the way for growth to pick up pace in the coming times, said Sharad Jaipuria, President of PHD Chamber.

As the monsoon scenario is not that much promising in the current year, the government should take measures to mitigate the impact of deficient monsoon on prices of agricultural commodities, he added.