Inflation up at 23-month high

New Delhi: Wholesale price index jumped to 23-month high of 3.55 per cent in July due to costlier food items. It was at 1.62 per cent in June.

Food inflation breached the double digit mark at 11.82 per cent in July. All items, barring onion, in the basket showed a rising price pressure.

Inflation in vegetables soared by 28 per cent in July, potato by 58.78 per cent, fruits by 17.30 per cent and fruits 17.30 per cent hitting the common man. Pluses inflation in July was at 35.76 per cent. However, prices of onion in July came down by 36.29 per cent.  “An adverse base effect was expected to result in a significant rise in WPI inflation in July 2016. The initial print of 3.55 per cent has exceeded the consensus forecast of 2.5 per cent by a wide margin, with all the major sub-indices recording a sharper-than-anticipated hardening,” said Aditi Nayar, senior economist, ICRA.

She said that higher food inflation was not the only culprit for the jump in WPI inflation in July 2016, with substantive rises in prices of items such as raw cotton.

“Trends regarding the ongoing kharif sowing suggest an imminent cooling of food inflation in the coming months. In contrast, we expect core WPI inflation to continue to rise, pushing up headline inflation, which would considerably narrow the gap between wholesale and retail inflation in second half of FY2017,” she added.

“The main push has come in from food articles wherein cereals, pulses and vegetables have all shown an increase in inflation. As such, this presents an issue on the supply side and will continue to hamper our progress in achieving stability in inflation,” said Richa Gupta, Deloitte India.