Wholesale price inflation remained in the negative territory for the fourth month in a row in July at (-)1.36 per cent, even though prices of food items, especially vegetables, skyrocketed.
The inflation, however, has inched up from (-)4.12 per cent recorded in June fuelled by 62.12 per cent rise in vegetable prices.
In July last year, wholesale price index (WPI) was 14.07 per cent.
The WPI based inflation rate in food articles jumped 14.25 per cent in July, 2023, against 1.32 per cent in June.
"Decline in the rate of inflation in July, 2023 is primarily contributed by fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products," the commerce and industry ministry said on Monday.
CareEdge chief economist Rajani Sinha said if the food prices continue to trend upward, the deflationary trend could end, and WPI inflation could turn marginally positive in the coming months.
"Additionally, the uptrend in global crude oil prices, global edible oil prices, and uneven monsoon distribution domestically pose an upside risk to the outlook.
"Nevertheless, we expect the WPI inflation for this fiscal at a subdued level (in the range of 1-2 per cent) with positive implications for the retail inflation trajectory," Sinha said.
Fuel and power basket inflation eased to (-)12.79 per cent in July from (-)12.63 per cent in June.
In manufactured products, the inflation rate was (-)2.51 per cent as against (-)2.71 per cent in June.
Barclays head of EM Asia (ex-China) Economics Research Rahul Bajoria said the softer pace of decline in WPI month on month was driven almost entirely by vegetable prices, which rose materially.
Apart from vegetables, increases were visible in cereals and pulses, where inflation was 8.31 per cent and 9.59 per cent, respectively.
The RBI last week kept interest rates unchanged at 6.5 per cent for the third straight meeting but signalled tighter policy if food prices drive inflation higher.
"The job on inflation is still not done," RBI Governor Shaktikanta Das had said.
"Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties."
The RBI raised its inflation forecast for the current financial year ending March 2024 to 5.4 per cent from 5.1 per cent earlier, citing pressures from food prices.
The central bank takes into account retail or consumer price index based inflation for formulating monetary policy.
Retail inflation data for July is scheduled to be released later in the day.
"We do not expect any further rate moves for the rest of the fiscal year, but any more supply shocks could raise the risks of an incrementally hawkish MPC, especially in the next two meetings," Bajoria added.
