WPI Drops Marginally in July, But Manufacturing and Food Costs Signal Lingering Economic Strain

India records a slight drop in wholesale inflation to 9.78 per cent for July, though rising manufacturing costs persist.

Producer cost burdens are shifting significantly amid global supply chain disruptions. India has recently seen a slight moderation in wholesale inflation. The Wholesale Price Index dipped to 9.78 per cent in July. Previously, this figure stood at 9.87 per cent in June.

This marks the first monthly decline under the revised 2022-23 base year. However, financial experts believe these figures remain uncomfortably high. Prachi Kele from PL Capital noted the persistence of elevated numbers. She explained that inflation in manufactured products accelerated to 8.29 per cent.

Therefore, persistent cost pressures continue to heavily affect domestic producers. She warned that sustained input costs could eventually impact consumer prices. Meanwhile, geopolitical tensions are driving overall inflation upward. The ongoing conflict in West Asia significantly disrupted key shipping routes.

The Strait of Hormuz blockade drove up global crude oil prices. Furthermore, international disruptions created spillover effects on domestic food prices. Primary articles recorded an inflation rate of 8.52 per cent. The overall food index rose to 6.65 per cent in July.

Conversely, wholesale inflation for fuel and power decreased notably. This sector recently recorded a drop to 20.05 per cent. The Commerce Ministry identified several key drivers for the July figures. These included mineral oils, basic metals, and various chemical products.

Core inflation excluding food and fuel reached a series high. Rahul Agrawal from ICRA Ltd. observed that this metric hardened to 8.2 per cent. He attributed this to upward trends across numerous sub-sectors. Nevertheless, economists anticipate a broader easing towards August.

Agrawal projected inflation might fall below 9.5 per cent shortly. Overall prints will likely remain elevated throughout this financial year. Consequently, this could feed into higher nominal GDP growth forecasts.

(Source: businessline)

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