India’s wholesale price inflation at a 5-month low of 5.19% in July

India's wholesale price inflation hit a five-month low of 5.19 per cent in July, helped by a moderation in fuel prices even as soaring prices for vegetables and fruit pushed up retail price inflation higher during the month.

The annual rate of inflation based on the wholesale price index stood at 5.19 per cent in July 2014 compared to 5.43 per cent in the previous month and 5.85 per cent during the corresponding month of the previous year.

Build-up of inflation rate so far during the financial year was 2.38 per cent compared to a build-up of 3.17 per cent in the corresponding period of the previous year.

The wholesale price data that comes days after retail inflation hit a two month high, validating the central bank's decision to keep interest rates high, is unlikely to help ease interest rates that business and industry demands to put momentum into the current lacklustre growth.

The index for the primary articles group rose 2.7 per cent in July 2014 following a 3.6 per cent increase in the index for the constituent 'food articles' group on the back of an increase in the prices of fruits and vegetables, cereals including maize, wheat, jowar, barley, bajra and ragi and pulses such as urad, arhar and masur, condiments and spices, meat and egg as also tea. However, the prices of fish, gram and poultry chicken declined.

The index for the 'non-food articles' group rose 0.8 per cent due to higher price of guar seed and gingelly seed (sesamum), dried copra, castor seed and niger seed and rape and mustard seed, fodder, cotton seed and mesta. However, the price of raw jute, raw rubber and raw silk, soyabean, sunflower and groundnut seed declined.

The index for the 'minerals' group rose 0.1 per cent due to higher price of barytes, steatite and magnesite, sillimanite and chromite and copper ore. However, the price of phosphorite and zinc concentrate declined.
The index for the fuel and power group rose 1.1 per cent due to higher price of petrol and furnace oil, bitumen and high speed diesel and aviation turbine fuel.

The index for the manufactured products group rose 0.3 per cent on the back of a 1.7 per cent increase in the index for 'food products' group due to higher price of tea and coffee powder, oil cakes, sugar, gur and salt, ghee and vanaspati, bakery products, soyabean oil, groundnut oil, sugar confectionary and powder milk. However, the price of processed prawn, sooji and rice bran oil, gingelly oil, cotton seed oil and wheat flour declined.

The index for the `beverages, tobacco and tobacco products' group rose 0.7 per cent due to higher price of  rectified spirit, bidi and dried tobacco.

The index for the 'textiles' group rose 0.1 per cent due to higher price of jute sacking cloth, jute yarn, cotton yarn, manmade fibre and jute sacking bag. However, the price of manmade fabric and gunny and hessian cloth declined.

The index for the 'wood and wood products' group declined by 0.9 per cent due to lower price of plywood and fibre board.

The index for the 'paper and paper products' group rose 0.1 per cent due to higher price of corrugated sheet boxes.

The index for the 'leather and leather products' group declined by 0.9 per cent due to lower price of leather garments and jackets.

The index for the 'rubber and plastic products' group rose 0.3 per cent due to higher price of tyres.

The index for the 'non-metallic mineral products' group rose 0.5 per cent due to higher price of bricks and tiles and marbles.

The index for the 'basic metals, alloys and metal products' group declined by 0.2 per cent due to lower price of ferro manganese and HRC, gold and gold ornaments, melting scrap, billets and ferro silicon and plates. However, the price of steel rods, wire rods and pressure cooker moved up.

The index for the 'machinery and machine tools' group rose 0.1 per cent due to higher price of hydraulic equipment, battery dry cells, fans, insulators and magnets. However, the price of fibre optic cable, cranes and rubber machinery declined.

The final inflation rate for May 2014, based on the revised wholesale price index for 'all commodities', stood at 6.18 per cent compared to 6.01 per cent as reported earlier.

The wholesale price is no longer relevant for Reserve Bank's policy decisions although it may act as a broader indicator of the economy.

Surging costs for vegetables, fruit and milk led to a faster-than-expected 7.96 per cent year-on-year increase in retail prices in July, official data released on Tuesday showed. The central bank wants to reduce retail inflation to 6 per cent by 2016.

RBI held key rates unchanged in its policy review last week citing the risk that inflation could increase due to the weak start to the monsoon.